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Employment Allowance Advice Note

24 - 08 - 2020

What is the Employment Allowance?
The Government originally announced, in the Autumn Statement 2013, an
Employment Allowance of up to £2,000 to be deducted from the Employers’ Class 1
National Insurance Contributions (NIC). The allowance has been increased
subsequently and for the 2020/2021 tax year is £4,000.


The Government originally announced, in the Autumn Statement 2013, an Employment Allowance of up to £2,000 to be deducted from the Employers’ Class 1
National Insurance Contributions (NIC). The allowance has been increased subsequently and for the 2020/2021 tax year is £4,000. 
 
How is the Employment Allowance claimed?  
 
The allowance is claimed as a deduction against the Employers’ Class 1 NIC up to a maximum of £4,000.
 
Will the company receive a cash payment of £4,000?   
 
No, the allowance is offset against any Employers’ NIC due.
 
Who can claim the Employment Allowance?  
 
Any employer who incurs Employers’ Class 1 NIC and has Employers’ Class 1 National Insurance liabilities of less than £100,000 in the previous tax year.
 
Who is excluded from claiming the Employers Allowance?
 
The following is not an exhaustive list and the legislation should be consulted to decide if the employer is excluded.
The excluded employers include:
A company with only one employee paid above the Class 1 National Insurance Secondary threshold AND the employee is also a director of the company. This exclusion means that one person limited companies cannot claim the Employment Allowance.
A business cannot claim Employers Allowance for employees whose earnings are within the IR35 off-payroll working rules.
Employers who employ someone for personal, household or domestic work,such as a nanny, au pair, chauffeur, gardener, care support worker.
Employers already claiming the allowance through a connected company or charity.
Employers who are a public authority, this includes; local, district, town and parish councils
Employers who carry out functions either wholly or mainly of a public nature unless they have charitable status on 6th April 2014
 
When is the Employment Allowance available?
The Employment Allowance has been available since the 2014/15 tax year starting on the 6th April.  
 
Can I claim for past years?  
 
Yes. 
 
You can claim Employment Allowance for the previous 4 tax years, dating back to the 2016/2017 tax year. 
 
What are the previous tax years Employment Allowances?       
 
Tax Year Employment Allowance                                                                                                                                                                                                                     2014/15 to 2015/2016 £2,000                                                                                                                                                                                                                   2016/2017 to 2019/2020  £3,000                                                                                                                                                                                                             2020/2021 onwards £4,000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           At what Salary levels are NIC's due?
 
Threshold 2020/2021 Weekly Earnings Rate due are                                                                                                                                                                                Primary (employees NI) 183.00  @ 12%                                                                                                                                                                                          Secondary (employers NIC) 169.00  @ 13.8% 
                                                                                                                                                                                                                                                             Note:The Employment Allowance can only be offset against Employers’ NIC NOT Employees’ NIC.     
 
Foremans LLP claim the Employment Allowance for eligible clients as part of our normal professional services.If you would like to discuss any of the issues noted above please contact us on:  01244 625 500 or 01978 364 000                                                                                                                           
or contactus@foremansllp.com                                                                                                                                                                                                                   Whilst all due care and attention has been taken in the preparation of these notes no liability can be accepted for any omission or item contained therein.               Foremans LLP                                                                                                                                                                                                                                                   April 2020
                                                                                      
 
 
 


 

 

 

 

 

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