The news on employment taxes was not particularly good from the Budget on 22 June.
Whereas the significant increase in the personal allowance from next April is welcome, it is not going to benefit anyone paying tax at 40% or more as the basic rate limit is going to be reduced so that higher rate taxpayers do not benefit.
Also there is no change on the proposed 1% hike in the rate of national insurance being paid by employees from April 2011. It will feel just the same as a 1% rise in income tax.
You may recall there was much talk in the General Election about the ‘jobs tax’ – the proposed increase in employer’s national insurance. What happened on this?
Again the news was disappointing for most. Employers outside of London, the South East and East Anglia will benefit from a new NIC holiday for 3 years for new businesses which start-up in those areas. Although there will be a significant increase in the threshold above which all employers pay employer’s national insurance, there will still be the 1% hike in rates increasing to 13.8% coming in from April 2011. We will not hear until the Autumn what the new threshold will be and until then we cannot compute accurately who will be the winners and the losers. Those paying predominantly low wages will benefit while those employing predominantly skilled staff will feel a real ‘jobs tax’ being imposed.
If you would prefer to do away with the burden of employer’s NIC for employees earning £50k a year or more and so make a significant improvement to your margin, please contact me on 01494 739500 or by email at cormacmarum@harwoodhutton.co.uk