Are you claiming the Employment Allowance?

If you have a business that employs other people, you may be eligible to claim an employment allowance worth up to £3,000 per year towards the cost of employers’ Class 1 NICs (national insurance contributions).

What is the Employment Allowance?

The Employment Allowance is an annual amount that is currently available to all eligible businesses and charities to reduce their employer Class 1 secondary NICs bill. The current amount for the 2019-20 tax year is £3,000. The Employment Allowance was introduced in April 2014 to support employers in the growing of their company and the hiring of new employees. Small employers are most likely to feel the benefit of this, but many do not realise that they are eligible for the benefit.

Who can claim?

• Anyone who employs other people and pays employers’ (secondary) NICs is eligible including:

• Sole traders, partnerships and companies

• Charities and those with charitable status such as schools, academies and universities

• Community amateur sports clubs

• Employers of care or support workers (from 2015/16 onwards).
  

Who cannot claim?

The following employers are not eligible to claim the Employment Allowance:

• Single Director Company Introduced in 2016, if you’re the director and the only employee paid above the secondary NIC threshold, you are not eligible.
  

• Public Bodies Public bodies or businesses doing more than 50% your work in the public sector are not eligible - unless you are a charity. This category includes local councils, health authorities and independent business carrying out a public body duty such as refuse collection. It does not affect businesses that supply services such as cleaning or IT support to public bodies.
  

• Employers of personal, household or domestic workers The employment allowance was extended to include care workers, but it is only available where the employee is providing personal care to someone who needs support due to their age or a physical/mental illness. It does not apply when workers like a nanny, cleaner, cook or gardener are employed.
  

• A service company working under ‘IR35 rules’ If you are a service company working under ‘IR35 rules’ and your only income is the earnings of the intermediary (such as your personal service company, limited company or partnership) you are not eligible to claim the allowance. The allowance is still available where the company has employees in its own right.
  

• Connected Companies The Employment Allowance is restricted where two or more companies, which include LLPs, are connected. Similar provisions apply where two charities are connected. In this case, only one of the connected companies can claim. Two companies will be connected if one controls the other, or both are under common control of the same person(s) at the start of the year of claim.
  

How do I claim the Employment Allowance?

You can claim the allowance through your payroll software by putting 'Yes' in the 'Employment Allowance Indicator' field the next time you submit an Employment Payment Summary (EPS) to HMRC. Your claim will continue until you stop it, so you only need to do this once.

We can process current and backdated claims for employment allowance including periods where we did not manage your payroll, and deduct the allowance from employer NIC liabilities for eligible businesses. Speak to us today for more information about this.