National Insurance employment allowance
Further information, together with answers to some frequently asked questions, has been published by HMRC concerning the introduction of an employment allowance of £2,000 per year for all businesses and charities, to be offset against their employer Class 1 secondary NICs’ bill from April 2014.
The allowance will be claimed as part of the normal payroll process through RTI using either an employer’s own payroll software or HMRC’s Basic PAYE Tools. The maximum amount available is capped at £2,000 per year. For example, if an employer’s Class 1 NICs are £1,200 each month, in April your Employment Allowance used will be £1,200 and in May £800. HMRC will automatically carry the claim forward each year but should be notified if there has been a change in circumstances that would affect an employer’s entitlement to the allowance.
There are a number of excluded employers who cannot claim the employment allowance. These employers include those where someone is employed for personal, household or domestic work, such as a nanny or au pair and functions that are either wholly or mainly of a public nature. In addition, no allowance is available for deemed payments of employment income.
It is estimated that up to 1.25 million employers will benefit from the employment allowance. This includes some 450,000 small businesses that will no longer have to pay National Insurance Contributions.