Act now to mitigate national insurance rises

Employers should act now to mitigate the impact of the increase in national insurance (NI) contributions from 6 April.

Staff will see an increase of 1% in the level of NI they pay on earnings, from 11% to 12% below the upper earnings limit and from 1% to 2% above it. Employers’ NI will increase from 12.8% to 13.8%, as will the rate paid on benefits in kind, which have a Class 1A NI liability.

Karen Thomson, associate director of policy, research and strategic visibility at the Chartered Institute of Payroll Professionals, said although employers would not feel the effect of the rise until July 2012, when they had to pay Class 1A NI contributions for the 2011/12 tax year, the issue needed to be at the top of their agenda now. “It will not affect employers’ cashflow until July 2012, but they will have to budget for it and any benefits they provide which have a Class 1A liability,” she said.

Thomson added that benefits provided through salary sacrifice arrangements could help to mitigate the impact of the NI increase.

But she is concerned that the rise in Class 1A NICs will prompt employers to question the cost of providing benefits in kind in future. “The 1% increase does not sound a huge amount, but for a large workforce that all have a benefit that attracts Class 1A, that could make a considerable difference, so employers need to budget for it for next year,” she said.

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