Budget 2013 – Employment Allowance’ (EA) and Employment-Related Loans

Employment Allowance (EA)

The Chancellor asked businesses what would help them recruit more staff and his solution to their requests for NIC breaks was an ‘Employment Allowance’.

Available to all businesses and charities from April 2014, the EA will reduce an employer’s NIC bill by up to a maximum of £2,000. Over 90% of the benefit is expected to go to smaller businesses with 450,000 of the UK’s small businesses no longer subject to employer NICs.

Every business will be able to take one worker on a salary of £22,400 or four employees working full time on the adult National Minimum Wage, without suffering any employer NIC costs.

Administration of the EA is designed to be straight forward, with employers confirming eligibility through standard software and HMRC’s Real Time Information system and up to £2,000 in employer NIC liability deducted over the course of the year’s PAYE payments.

Employment-Related Loans

There will now be no tax charge where the total outstanding balance on a small loan from the employer does not exceed £10,000 throughout the tax year. Such loans include those where the rate of interest charged is less than the official rate of interest. It also covers notional loans, such as season tickets for rail travel.

This means that employers will no longer be required to report the loan on the P11D form, provided it stays below £10,000 for the year..