Since April 2016 the Employment Allowance has been £3,000 per tax year for all employers with the exception of single director businesses. This is due to change again from the 2020-21 tax year, as with the previous change this will benefit some business and disadvantage others.
What is changing?
The Employment Allowance is now worth £4,000 per tax year for qualifying employers and is offset against their Employers National Insurance Liability. A small employer employing two people each with an an annual salary of £23,500 will only pay £60 in employers Class 1 National Insurance for the 2020-21 tax year instead of £4,060.
Only businesses who had a National Insurance liability of less than £100,000 in the previous tax year can claim. This change removes large businesses from being able to save due to the allowance, however the benefits of the allowance are much less due to the overall cost of employment for these employers.
Are you eligible?
The Employment Allowance is open to most businesses and charities who have a previous National Insurance liability of less than £100,000. However, there are some businesses that fall into this category who are not eligible for the scheme, including:
- Domestic employers, though those employing care/support workers do qualify
- public bodies or businesses who work mainly or wholly for a public nature, except charities
- service companies
- those who are already part of a group where another business has already claimed the allowance
- single director companies
- those who have claimed over the de minimis state aid threshold.
How to claim?
Claiming your Employment Allowance should be a simple process through your payroll software or alternatively through HMRC Basic Tools.
You only need to claim Employment Allowance once, this automatically roles over to future tax years. If you become no longer eligible then you will need to mark this as such in your payroll records.
For more information on Employment Allowance take a look at the HMRC’s website.