National Insurance and State Pensions

5. Reducing Contributions

There are a number of ways to reduce the contributions you are obliged to pay.

5.1 Offer employees a contracted-out company pension scheme. This reduces contributions for everybody.

5.2 Structure pay and staffing arrangements so that employees earn just below the NI threshold (but you must ensure you are paying the national minimum wage).

5.3 Some taxable ‘benefits in kind’ are not subject to employer (or employee) NICs.

  • Provision of most employer childcare facilities, certain counselling, subsidised meals and light refreshments provided equally to all employees.Nor are long-service awards (of up to £50 per year to employees with at least 20 years service) or employer-financed annual parties (costing £150 per head per year). However, payment of cash or cash vouchers is subject to NICs.

5.4 Employees adopting ‘employee shareholder’ status who purchase company shares will be exempt form NICs and income tax on the first £2,000 of shares.

  • Employee gains up to £50,000 will also be exempt from Captial Gains Tax.This will apply to shares received through adoption of ‘employee shareholder’ status on or after 1 September 2013.

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