Business lobbies hail £2,000 cut to national insurance jobs tax

 
Ben Southwood
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BUSINESS groups hailed the chancellor’s decision yesterday to let companies off the first £2,000 of employer national insurance contributions, commonly known as the jobs tax.

“We warmly welcome the employment allowance that will waive the first £2,000 of each employer’s national insurance contributions,” said Richard Baron, head of tax at the Institute of Directors.

Baron added: “This allowance rewards that hard work and helps companies to go even further in alleviating unemployment.”

The Treasury said that the measure would take one third of all firms out of the jobs tax, by giving them their first employee at £22,000 per year, or four full-time minimum wage workers free.

But the allowance will not be available to households hiring nannies, the Treasury said, as it goes only to business, charities and other incorporated institutions.

But employers with a national insurance bill over £2,000 still face a 13.8 per cent rate on all pay over £136 per week for extra workers, so the move will make little difference to medium or large firms’ marginal employment decisions.

The government estimates that reining in the amount they claw in from firms will reduce their revenues £1.26bn in the 2014-15 tax year, £1.37bn in the following year, and £1.6bn in 2016-17, before rising up to £1.73bn in the 2017-18 financial year.