Employment Allowance

02/04/2014 Filed under HR

The National Insurance Contributions Employment Allowance was announced in the 2013 budget and comes into force from the first payroll liabilities payment after 6 April 2014.

What is the Employment Allowance?

The Employment Allowance enables most private sector employers to reduce their class 1 (employers National Insurance) contributions by up to £2,000 over the financial year. In short as an employer, if your staff earn over the NI threshold you will save money.

How do you claim Employment Allowance?

The £2,000 Employment Allowance will be deducted from your monthly liability payment to HMRC, this should be an automatic process that is performed by your payroll services supplier. If they have not confirmed that they will do this then you should ask them to make sure! We at summ.it use only HMRC accredited payroll software so all of our clients are guaranteed to claim the benefit automatically. If you are unsure as to whether you will be claiming the allowance or require any assistance just contact us and we will help.

A few details

  • If your company belongs to a group of companies or your charity is part of a charities structure, only one company or charity can claim the allowance. It is up to you to decide which company or charity will claim the allowance.
  • When you make your claim, you must reduce your employer Class 1 NICs payment by an amount of Employment Allowance equal to your employer Class 1 NICs due, but not more than £2,000 per year.
  • For example, if your employer Class 1 NICs are £1,200 each month, in April your Employment Allowance used will be £1,200 and in May £800, as the maximum is capped at £2,000.
  • Certain employers can’t claim – so individuals can’t claim for personal, household or domestic workers such as a nanny, au pair, chauffeur, gardener, care support worker
  • Personal and Managed Service Companies who pay contract fees instead of a wage or salary, may not be able to claim the Employment Allowance, as you cannot claim the allowance for any deemed payments of employment income.