Autumn Statement: Employer national insurance contributions to be scrapped for u-21s

Chancellor of the Exchequer George Osborne

Employers’ national insurance contributions will be abolished altogether for employees under the age of 21 in 2015, the Chancellor of the Exchequer has announced in his Autumn Statement today.

George Osborne revealed the reduction, designed to reduce levels of youth unemployment, alongside other announcements that will affect employers – including an earlier than expected increase in the state pension age and more accessible funding for apprenticeships available directly from HM Revenue & Customs (HMRC).

The removal of employers’ national insurance (NI) contributions for under-21s in April 2015 will follow the introduction of the £2,000 “employment allowance” that comes into force next April. Higher-rate taxpayers who are under 21, earning £813 per week or more, will still attract employer NI contributions.

“Employer NI contributions will be removed altogether on a million and a half jobs for young people. We’re not going to leave young people behind as the economy grows,” said Osborne. “We are going to have a responsible recovery for all.”

The Government will reform apprenticeship funding to allow employers to receive assistance with the training costs of apprentices directly through an HMRC-led system, and will invest in higher apprenticeships by providing £40 million towards an additional 20,000 higher-apprenticeship schemes to commence over the next two academic years.

Other relevant measures announced by the Chancellor today include:

  • The state pension age will increase to 68 in the mid-2030s and to 69 in the late 2040s.
  • Business rates in England and Wales will be capped at 2%, rather than being linked to retail prices index inflation.
  • Growth forecasts for this year more than doubled, from 0.6% to 1.4%; for 2014 were revised from 1.8% to 2.4%; and for the following four years to 2.2%, 2.6%, 2.7% and 2.7% respectively.
  • The personal income tax allowance will rise to £10,000 from April 2014. It will then increase by the consumer prices index measure of inflation in future years, starting from 2015/16.
  • Anyone aged between 18 and 21 who is claiming benefits without basic English or maths will be required to undertake training from day one or lose their entitlement. Those unemployed for more than six months will be forced to start a traineeship, take work experience or do a community work placement or they will lose their benefits.
  • From October 2014, bonus payments made to employees of indirectly employee-owned companies that are controlled by an employee ownership trust will be exempt from income tax, up to a cap of £3,600 per year.
  • The maximum monthly amount that an employee can contribute to “save-as-you-earn” schemes will double in April 2014, from £250 to £500.
  • The Government will amend existing legislation to prevent employment intermediaries being used to avoid employment taxes by disguising employment as self-employment.
  • A tax exemption will be extended to medical treatments recommended by employer-arranged occupational health services, in addition to those recommended by the new health and work assessment and advisory service.
  • From 2015/16, spouses and civil partners will be able to transfer £1,000 of their income tax personal allowance to their spouse where neither partner is a higher- or additional-rate taxpayer.

Commenting on changes to pension arrangements, head of employment and skills policy at the EEF Tim Thomas said: “Today’s tough decision to speed up increases in the state pension age was the right one and was backed up with measures to support saving for retirement. The Government now needs to look at whether or not it has the right package of measures on training, careers and rehabilitation to allow older employees to prolong their working lives.”

TUC general secretary Frances O’Grady said: “There has been no new evidence to show that people are living any longer since the last time the Chancellor increased the state pension age, yet today’s young workers are being told they must work until they drop.”

John Cridland, the CBI director general, said: “Abolishing a jobs tax on employing young people under 21 will make a real difference and help tackle the scourge of youth unemployment.”

British Chambers of Commerce director general John Longworth also welcomed the move, but added: “We are concerned that some companies might find it difficult to keep these young people on after their 21st birthdays, when employer NI contributions would kick in. We would urge the Government to consider some sort of taper, so that we avoid seeing people who are hired at 18 or 19 let go when they reach 21. A taper would also mean that the over-21s are not disadvantaged in the job market.”

XpertHR Pay Intelligence: Autumn Statement 2013 – NI relief for young people, and increase in SAYE limits

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