Rising National Insurance Contributions – What Is The Reality For Your Business?

Get Prepared Today by Contacting Car Benefit Solutions.

Tags: Corporate

If you’ve not considered the implications of the pending increase in National Insurance Contributions (NICs) and how it will affect your business, then here’s what you need to know. 

Although the rise doesn’t take effect until April 2022, now is the time to prepare for the increase. 

Delaying will see your business incur the below increased costs.  

Annual Employee SalaryAnnual Current Employer NI Payment – 13.8%Annual Additional 1.25% NI Payment – 15.05%
£20,000£1,540+£139
£30,000£2,920+£264
£50,000£5,680+£514
£80,000£9,820+£899
£100,000£12,580+£1,139

How will the increase affect your business? 

With NICs rising by 1.25% across the board, from April 2022, you, the employer will be contributing 15.05% in NICs on your employees’ earnings over £737 per month or £8,844 per annum, up from the current rate of 13.8%.  

If we analyse the numbers, and calculate the additional cost for you based on an employee earning £30,000 per annum, you will be paying out an extra £264 in NICs per employee, per year. Depending on the size of your company and its workforce, payroll would increase by £13,255 for 50 employees, £26,450 for 100 employees and £52,900 for 200 employees.  

Not only will the payroll bill increase, but so will the benefits bill, because the increase is also applicable to Class 1A National Insurance Contributions. This means it will cost more to provide Benefits-in-Kind (BIK), including company cars.  

So, with these increased costs imminent, now is the time to rethink your employee car benefit provision. Creating business savings to balance out or surpass the extra NIC costs are more important than ever, and Car Benefit Solutions (CBS) are here to help.  

We offer a genuine breadth of choice for your employee car benefits including Employee Car Ownership Schemes (ECOS), Salary Sacrifice and Business Leasing.

ECOS 
Employee Car Ownership Schemes (ECOS) are a way to provide your employees with a car benefit that is not subject to BIK tax, Class 1A National Insurance Contributions (NICs) or P11D reporting. You are in full control over which of your employees are eligible for ECOS and which vehicles they can choose from – they can be new or used cars.

Salary Sacrifice 
Your employees choose their vehicle from an agreed list of cars, and then we, Car Benefit Solutions (CBS) order the vehicle and arrange delivery. Your employees enter into a salary sacrifice arrangement in exchange for the car benefit, and each month the business pays for the vehicle leasing costs. You would save on Class 1 NICs for the salary given up by your employees, and although you would still have to pay Class 1A NICs, this would be less than the NICs on the salary.

Business Leasing 
You choose the vehicle, term and mileage that suits your needs and then we will order your vehicle and arrange delivery to you. Each month you pay a rental amount to us, and at the end of the term, you hand the vehicle back. Providing the vehicle is in good condition and has not over-travelled, there is nothing more to pay. 

Although a business leasing solution will not provide any savings in terms of NICs, taking this option with CBS would allow you the flexibility to switch between our products, including ECOS and salary sacrifice, should you wish to do so. 

Over recent years, the cost of providing and driving a company car has risen sharply as a result of scheduled increases to benefit-in-kind rates and Worldwide Harmonised Light Vehicle Test Procedure (WLTP), and now the increase in NI is pushing the cost up even more.  

By choosing a solution from CBS, you have the opportunity to eliminate or reduce the NICs on employee car benefits, and make additional savings that can be utilised to offset the increase in NI payments. 

Car Benefit Solutions is a specialist provider of employee car benefits, so if you would like more information about how we can help you and your corporate fleet, please get in touch. 

Contact Details

The Barracks,

400 Bolton Road,
Bury, BL8 2DA

Monday - Friday

8:30 - 17:30