Regional employer NICs holiday for new businesses
9 August 2010
Bookmark and Share
 
   
Email article : Print article : More articles like this

As well as reversing the previous Government's plans to increase employers' National Insurance contributions (NICs) by 1% in the June Budget, the coalition Government also announced a new scheme through which new businesses can get a significant reduction in their employer National Insurance contributions.
This new scheme could be introduced as early as next month and further details have now been released by HMRC briefly explaining how it will work and who will be eligible.
 
During a three year qualifying period, new businesses which start up in the following countries or regions will not have to pay the first £5,000 of Class 1 employer NICs due in the first 12 months (52 weeks) of employment, providing they fall within the qualifying period:
  • Scotland
  • Wales
  • Northern Ireland
  • North East
  • North West
  • East Midlands
  • West Midlands
  • Yorkshire and the Humber.
The scheme is intended to promote the formation of new businesses employing staff in those areas most reliant on public sector employment. This means that start ups in London, the South East and the East are not covered by the scheme.
 
The scheme is expected to come into effect from September 2010, but any business set up in these areas from 22 June 2010, which also meet any qualifying criteria, could benefit from the scheme.
 
The holiday applies to the first 10 employees hired in the first year of business. This means that a new business hiring 10 employees could save up to £50,000.
 
If you are a new business (set up after 22 June 2010) you still need to pay employer NICs before the holiday scheme launches, but you will receive a holiday of equal duration once the scheme starts.
 
Full details of who is eligible for the scheme will be made available soon. HMRC will produce detailed guidance for all businesses before the scheme launches. As the scheme is due to launch as early as 6 September, this guidance should be forthcoming very soon.
 
In the meantime, HMRC have produced a FAQs document, which can be downloaded here.
 

NICs changes for established businesses

Although the coalition Government scrapped plans for a further increase on employer's contributions following pressure from the Forum and other business organisations, the planned 1% increase on employee contributions will still go ahead from April 2011.
 
It was also announced in the June Budget that the threshold for NICs will be increased by £21 a week above indexation. This will also come into effect from April 2011. It is anticipated that 650,000 businesses will benefit from this increase.


Related articles