The increase in the National Insurance contributions and what does this mean for me!

The season of peace and goodwill is well and truly upon us! And for many this heralds that most joyous of events, the staff Christmas party!! Apparently the most popular day for this event is the Thursday of the second week of December, who knew? Drinks and meals out are the usual staff treat, some with a twist such as themed events or dance and karaoke nights. Some of my clients have been more adventurous in their offering with my personal favourite being a class in natural life drawing! Fortunately it was a mild December. Whatever the event there are some simple rules that need to be followed to ensure that The Revenue will join in the fun with you. HMRC allows businesses to spend up to £150 per head per year on staff events, including a Christmas party. This allowance is an exemption , not a relief . If you exceed the £150 per head limit, the entire amount becomes taxable, not just the excess . Now to be totally clear, this limit does include VAT and applies to the total cost of the event, including venue hire, food, drinks, entertainment, accommodation, and transport. This £150 per head allowance applies across all staff events in a single tax year and if you hold multiple events, e.g., a summer barbeque and a Christmas party, the combined cost per head must not exceed £150. Finally, any events held do have to be open to all members of staff, whether you like them or not! If you are really generous you may also want to give Christmas gifts to your team. HMRC will allow you to do this without tax or national insurance implications if they can be deemed trivial benefits. To do this they must cost £50 or less and not be part of their contract or a reward scheme. Bottles of wine, boxes of chocolates and in the case of my adventurous client, a set of crayons, are all perfectly acceptable. Do the revenue enter into the Christmas spirit? They do in part but their Secret Santa stocking isn’t overflowing and any gifts they give can be taken back if the rules aren’t followed. To keep Scrooge at bay it is essential to keep accurate records showing that you have understood and properly followed the guidelines. So I hope that whatever Christmas treat you have planned for you and your team it is a fabulous festive celebration. And don’t forget to lift a glass to thank the HMRC for being more Santa’s little elf helpers rather than the full on Scrooge! Wishing you all a Happy Christmas and a very prosperous New Year. 

Most of you will probably think the latter. If you are an employee, you’ll probably be pleased that you’re going to have the same take home pay as you did before the budget so why worry about the rest? Well, you should because your hard-earned money is not going to be worth as much going forward due to this budget. So rather than the usual budget round up lets dig deeper into the impact on us all of the increase in Employers National Insurance rate . Although all businesses will be impacted by this measure it is the smaller ones that will feel the greatest effect. Small businesses are heralded as the backbone of our economy. Small and Medium Enterprises (SME’S) make up 99% of all UK businesses, employ 61% of total employees and produce a combined turnover of £2.4 trillion. I work with owners of such enterprises and they are the hardest working people I know. Running a small business can be very rewarding personally but often not financially. It is simply a myth that owners of SME’s sit back and enjoy the profits of others labours; most are working long hours every day just to make ends meet. The rise in National Insurance Contributions, arguable the biggest measure in the budget, will have a devastating effect on this the backbone of our economy. An increase in the rate to 15% coupled with the lowering of the threshold when it is paid to £5, 000 is forecast to generate £20 billion in tax revenue. Yes, the allowance every business receives before contributions are payable has increased to £10, 500 but really this is just a small drop in the growing ocean of the tax burden. The additional cost to a small business of this measure alone will be enough to push some owners to call it a day and close their doors. That will be a hard blow for some of those 61% employed workers affected by company closures; it won’t matter what was on their payslip as they no longer will receive one. Business closure is just one impact from this increase. This measure is a tax on jobs, on working people, absolutely guaranteeing lower wages and higher prices. Tax and employee national insurance contributions may not have increased on the payslip but the amount of money any worker receives will be worth less going forward. The Office for Budget Responsibility (OBR) have already forecasted that 76% of the increase in Employers National Insurance will be passed on to everyday people through lower real wages, a combination of pay freezes/cuts and increased prices. So, the definition of who the working person is has once again been dangerously misunderstood. No wonder that we are already hearing of owners who have decided they can no longer continue. The Labour government claims that this is a budget for growth but already the OBR has downgraded the UK’s forecast for growth. How can there be growth without our small businesses, the backbone of the British economy. It is not a green light for our economy, the future is not even orange. Like the colour of the party that is responsible for delivering on the budget promises, the future could very easily be red. It is without doubt that we are all going to pay the price for Labour’s extensive spending plans so I hope that they invest our money wisely. We are experts in small business and have analysed all the budget announcements and how they may affect SME’s. We can assist you with understanding how the increase in both National Insurance contributions and also minimum wage will affect your business and help you develop strategies to minimise the impact of this additional cost burden. Get in touch with us today to discuss how we can support your business through these changes and ensure you’re well-prepared for the future.

With the electric car market opening up significantly in the past few years, offering e-cars to your employees through a salary sacrifice scheme can be a highly attractive proposition. With the tax incentives available and purchasing and leasing options, it is important to fully understand how to navigate these to ensure that the promised benefits are enjoyed by both the employer and employee.