Claiming the employment allowance
The employment allowance of £3,000 per year, is available to most businesses and charities to be offset against their employers Class 1 NIC bill. The allowance can be claimed as part of the normal payroll process.
An employer can claim less than the maximum if this will cover their total Class 1 NIC bill. Eligible employers that have not yet done so can still claim for the current tax year (as well as make a backdated claim for one further tax year).
The eligibility to claim the employment allowance was removed for limited companies with a single director and no other employees, from April 2016. As the allowance was introduced as an inventive to take on staff, it was felt unfair that companies with a single director and no employees should benefit from the allowance.
There are a number of other excluded categories where employers cannot claim the employment allowance.
These include:
- Persons employed for personal, household or domestic work, such as a nanny or au pair (unless they are a care or support worker);
- A public body or business doing more than half your work in the public sector;
- A service company working under ‘IR35 rules’ and your only income is the earnings of the intermediary.
An annual employment allowance for businesses and charities, to offset against their employer’s Class 1 NICs, was introduced in April 2014. The allowance can be claimed as part of the normal payroll process through RTI using an employer’s payroll software or HMRC’s Basic PAYE Tools.
The maximum amount available is currently £3,000 per year. For example, if an employer’s Class 1 NICs are £1,200 each month, in April and May the employment allowance used will be for the full amount and in June the remaining £600 would be used.
There are a number of excluded employers who cannot claim the employment allowance. For example, persons employed for personal, household or domestic work, such as a nanny or au pair and employment that is either wholly or mainly of a public nature. No allowance is available for deemed payments of employment income. In April 2016 the eligibility to claim the employment allowance was also removed from limited companies with a single director and no other employees.
The annual employment allowance for businesses and charities in 2016-17, to be offset against their employers Class 1 NICs, is £3,000. The allowance can be claimed as part of the normal payroll process through RTI using an employer’s payroll software or HMRC’s Basic PAYE Tools. An employer can claim less than the maximum if this will cover their total Class 1 NIC bill.
There are a number of excluded employers who cannot claim the employment allowance. For example, persons employed for personal, household or domestic work, such as a nanny or au pair and employment that is either wholly or mainly of a public nature. No allowance is available for deemed payments of employment income.
Since April 2016, the eligibility to claim the employment allowance has been removed from limited companies with a single director and no other employees. This measure was put in place to ensure that companies with a single director and no employees do not benefit from an allowance designed to help small businesses take on additional staff. There are also limits on claiming the allowance for those working under the IR35 rules.