Increase in NI begins to bite

by Michael Blaken

We’re four months into the new financial year and it’s now that those rising costs of employing staff may begin to bite.

Let’s remind ourselves of what changed in April:

• The National Minimum Wage increased by 77p to £12.21 per hour – a 6.7% rise
• The threshold on employee earnings at which employer National Insurance (NI) contributions apply dropped from £9,100 to £5,000
• The NI rate increased from 13.8% to 15%

However, on the plus side the Employment Allowance – which allows eligible employers to reduce their annual NI liability – rose from £5,000 to £10,500.

And this is the key point. For many businesses, now we are four months on, that Employment Allowance will have been used up, or is about to be used up. It is now that employers will see the repercussions of the April tax rises, and notice the impact on their cashflow and P&L.

We have an example here which demonstrates how the rising costs of employment can affect a small business, along with advice on how to overcome this.

It’s essential for business owners to anticipate bumps in cashflow, and put in steps to iron them out, through careful planning.

That’s where the accountancy team here at Optimum can help you understand your numbers.

Get in touch here or email info@optps.co.uk. We work with business owners across Swindon, Wiltshire, Cheltenham and Gloucestershire.