CHANCELLOR Rishi Sunak will announce a cut in the ‘jobs tax’ in Wednesday’s Budget in a major boost for Britain’s businesses.
He will raise the Employment Allowance from £3,000 to £4,000 next month, giving an immediate reprieve to firms struggling with hikes to the minimum wage and coronavirus.
It means all firms will not have to pay Employer National Insurance Contributions (NICs) – known as the ‘jobs tax’ – on the first £4,000 of their annual bill.
The move was promised in the Tory manifesto but there were fears that it could be delayed after a tax break for firms who employ veterans was pushed back until next year.
But HOAR understands the employment allowance threshold will be raised as promised from next month.
The extra £1,000 buffer is designed to help firms cope with the rise in the minimum wage following last year’s radical decision to raise the minimum wage to £10.50 by 2025.
Next month the minimum wage will rise by 50p to £8.72 – six per cent above inflation. The Employment Allowance is designed to help small firms with the cost of employing people.
When it was first introduced it was intended that firms employing four people on the minimum wage would pay no National Insurance at all on the first £2,000 of their bill.
This buffer was increased to £3,000 in 2016 when the National Living Wage was introduced but has not been raised since despite further hikes in the minimum wage.
The Federation of Small Businesses said the move will give a much-needed reprieve to Britain’s army of 4.5 million small firms.
FSB boss Mike Cherry said: “Delivery of a manifesto commitment to increase the employment allowance to £4,000 from next month is very welcome.
“Small employers will be hugely grateful for this intervention, particularly with an inflation-busting 6 per cent increase in the national living wage taking effect in April.
“With businesses disrupted by coronavirus, this measure should now be followed up with the immediate re-introduction of a statutory sick pay rebate for small firms.
“Without one, we’ll likely see businesses going to the wall over the weeks ahead.”
