The new tax year is fast approaching, and subject to the government’s National Insurance Contributions bill receiving the final royal assent, we will have a new rate of employers National Insurance Contributions (“NIC”) of 15% taking effect for payroll periods commencing April 2025. Here is one potential action employers could undertake to mitigate the effects of this increase.
Reduce Your National Insurance Bill: Reviewing Employee Reward Packages -Smarter Benefits, Lower Costs
Cash is no longer king. Once National Minimum Wage requirements are met, consider incentivising staff more tax-efficiently.
Outlined below are typical benefits that could be offered as an alternative to cash, and where implemented correctly, the business could have no additional NIC costs or increased employer pension contribution costs.
The following staff benefits can typically be provided tax-free, subject to criteria (albeit this is generally limited criteria, or limited planning is required to meet such criteria)
- Annual events (under £150 per head)
- Staff loans (under £10k)
- Extra holidays
- Third-Party events
- Workplace training events
- Workplace parking
- £6/week home working
- Income protection
- Death in Service cover
- Professional subscriptions
The following additional benefits could be provided tax/National Insurance Contributions free, but typically, some planning is required to meet legislative criteria:
- Social events
- Health cash plans
- EAP/wellbeing
- Travel to work
- Mobile phone
- Meals on work premises
- Meal (travelling on business)
- Non-cash gifts
- Medical/eye check-ups
- Relocation (below £8k)
- Long service awards
- Suggestion schemes
What could I do now?
- Review your current benefit offerings against the above to identify other options which could be implemented. Have you conducted a recent staff survey to understand what additional benefits employees would value?
- Consider your wider policies, such as expenses. Particularly if these haven’t been reviewed by a tax professional for some time, there have been many changes in legislation, and your business might be paying more tax than you should. It could also be restructured to reduce cost.
- Review what is reported on your PAYE Settlement Agreement. Are you over-declaring benefits that meet tax exemption criteria? Or could you meet tax exemption criteria?
For other potential actions employers could undertake to mitigate the National Insurance increases, read this blog.
For more information, please contact Kyle Newton, Tax Partner.
