What does the increase in NIC mean for your business?


One of the tax increases that has not yet hit the headlines is the hike in National Insurance Contributions, which will take effect from 6 April 2011.


Employers NIC will rise to 13.8%. Employees NIC to 12% and the self employed rate to 9%. Earnings above the upper threshold will be taxed at 2% instead of 1%.


This is of course exactly what the previous government had proposed, so what’s different this time? For employees and the self employed, there is no difference at all. For employers, the increase is offset slightly by the increase in the NIC threshold. This will be lifted by  £1,092 on top of the normal indexed rise.


In practice, this means that the cost of employing someone earning under £20,000 will fall, but the cost of employing someone earning over £20,000 will increase, albeit marginally.