Claiming the employment allowance
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.