This valuable allowance is due to start for all businesses on 6 April 2014, and simply exempts the employer from the normal employer NICs of 13.8% of the earnings paid.
The mechanics are that the allowance will be obtained via standard payroll software and HMRC’s RTI system. A facility will be added to the RTI Employer Payment Summary referring to the allowance in the form of a “yes/no” indicator, with payroll software providers doing the same. The employer then offsets the allowance against each monthly Class 1 secondary NICs payment until fully claimed or the tax year ends. For the following tax year the allowance is available against NICs as the liability arises during the year.
For a small company rewarding working shareholders by way of dividends, the current thinking is that from 6 April 2014 it will usually be best to receive remuneration of £10,000 per annum instead of limiting it to the NIC secondary threshold of (currently) £7,696 as is normally done. This is because earnings of £10,000 will fully utilise the new level of personal allowance, whereas dividends effectively waste the allowance.
Our Payroll Service is designed to ensure that our client designs and operate their remuneration structure so that they pay the least amount of Tax and NICs.
“If you would like to know how we can help, please contact us today and we will do the calculations to reflect individual circumstances.”