NI boost to make it cheaper to hire staff

bUsInesses will receive higher relief on employees’ national Insurance contributions in a move that will help thousands of firms.

britain’s army of small employers will particularly benefit from the change, as many more will not have to pay any contributions at all.

There are also advantages for those which need to invest in machinery, as tax relief for purchases will not be slashed as far as expected.

employers are already able to write off the first £2,000 of their national Insurance (nIC) liabilities for workers.

but this allowance will rise by £1,000 from next year. It means firms could hire four workers on the new national Living Wage of £7.20 an hour – around £13,494 a year – without hitting the £3,000 national Insurance threshold. Alternatively, they could also hire one worker on £29,800 without reaching the £3,000 cap.

The budget documents declare: ‘ This will help all businesses and charities, particularly smaller ones, with additional wage costs. As a result, up to 90,000 employers will see their employer nIC liability reduced to zero.’

The £1,000 rise to the allowance will cost an extra £630million in 2016-17, rising to around £700million by 202021. Mr osborne added that he is cutting nIC ‘to help small firms’.

Ashley Hollinshead, at accountants Deloitte, said: ‘This increase will be welcomed by the estimated 1.25million employers that are entitled to this relief.’

but other firms said the giveaway may offer little solace to struggling fledgling companies, which are now required to pay the new living wage. David brookes, tax partner at bDo, said the move would be ‘largely offset by the introduction of the national living wage which may well have a significant impact on small businesses’.

However firms were also told they would receive permanent tax relief towards investment in manufacturing equipment.

Firms can currently deduct up to half-a-million pounds of invest- ment in machinery from their taxable profits. This was due to fall dramatically to £25,000 next year, but will instead be set at £200,000 from January 2016.

The Chancellor said: ‘I can confirm that the Annual Investment Allowance will not fall to £25,000 but be set at £200,000, this year and every year.’

Despite the amount being much higher than expected, it still means that firms have very little time to place major orders before the higher rate ends. This is because equipment must be on- site and ready to use by December 31 to be eligible for the allowance.

Tristan Watkins, of financial firm bnP Paribas, said: ‘While the Chancellor has clearly listened to the warnings that the original plan of cutting the allowance to £25,000 was not wise, there will still be some disappointment that the new level has not been set higher.’

THe self-employed could face an increase in their nICs as part of a tax review. Currently they pay two rates of national Insurance – a weekly rate of £2.80 and a percentage rate of 9 per cent on earnings above £8,060 a year. but a Treasury consultation is expected to see the first of these abolised and the second reformed.