Autumn Budget 2018 National Insurance

Autumn Budget 2018 National Insurance

The Autumn Budget in 2018 confirmed the following changes to National Insurance:

Employment Allowance

The employment allowance was established several years ago to assist businesses with a reduction in their National Insurance bill. Employers can deduct up to £3,000 from their employer National Insurance contributions.

To assist only smaller businesses from April 2020 this allowance will be restricted. When employers National Insurance exceeds £100,000 in the previous year they won’t be able to claim the £3,000 employment allowance.

The government has announced that they expect over 99% of micro-businesses and 93% of small businesses to still be eligible to claim the £3,000 employment allowance.

Class 2 and Class 4 National Insurance

Self-employed individuals pay Class 2 National Insurance and Class 4 National Insurance. Class 2 contributions are currently £2.95 per week and Class 4 is at a lower National Insurance rate of 9%.

The government had announced in a previous budget that Class 2 would be abolished and Class 4 would be reformed. This did not go down well with self-employed individuals as those with the lowest profits would’ve suffered significantly higher National Insurance contributions. The chancellor did an immediate U-turn and delayed the changes until April 2019.

It has now been confirmed that there will be no changes to Class 2 or Class 4 within this parliament however this is something which may be revisited in a future budget.

Minimum Directors Salary – £8,632

National Insurance for employees and employers is currently paid on earnings over £162 per week. From April 2019 this will increase to £166 per week.

We will therefore be recommending that owner managed Limited companies pay their Directors a salary of £8,632 per annum from April 2019. This is an increase in the current tax year salary of £8,424 per annum.

Read this previous blog for more information on tax efficient Directors salary.

Return to the Autumn Budget 2018 Overview

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