Introduced in April 2014, Chancellor of the Exchequer George Osborne announced in July’s emergency (summer) Budget that the Employment Allowance is due to increase from £2,000 to £3,000 in April 2016.
This full 50 percent increase is designed to help small and medium-sized business (SME) owners to reduce the cost of their wage bill and to offset the increased costs they may start to occur due to the new mandatory National Living Wage (NLW), also to be introduced in April 2016.
From next April the Employment Allowance will allow you to take up to £3,000 off your secondary Class 1 National Insurance Contributions (NICs) throughout the year until you receive back the full £3,000, or until the tax year comes to an end. You may not roll over any unused Employment Allowance to a new tax year, and you may only claim Employment Allowance for one PAYE (Pay as You Earn) scheme.
In the same Budget the Chancellor also announced that, from April 2016, if you’re the director and sole employee of your business you will no longer be eligible to claim the Employment Allowance on your own National Insurance bill.
You’re eligible to receive the Employment Allowance if you’re a business or charity (including, as is often the case, community amateur sports clubs) paying employers’ Class 1 National Insurance, or you’re an individual who employs a care or support worker.
There are several exclusions however, as secondary Class 1 National Insurance Contributions are known as ‘excluded liabilities’, meaning you cannot claim Employment Allowance on them if:
- – you’re personally employing somebody for household or domestic work, unless they’re a care or support worker,
- – you do more than half of your work in the public sector, unless you’re a charitable organisation,
- – you operate a service company which has only deemed payments of employment income under IR35.
How to Claim
The easiest, quickest, and arguably most efficient way to claim for the Employment Allowance is to do so through your accountant. Applying for the Employment Allowance is something your accountant will have done time and again for their clients, therefore even with the increased allowance providing a slight change to proceedings, your accountant will know how to get you started with ease.
If you don’t yet have an accountant (and you’re still looking around for the perfect pairing) you can claim for the Employment Allowance on your own behalf through your payroll software, if you have it, or by using HM Revenue and Customs (HMRC)’s Basic PAYE Tools.
Though directions will vary between different payroll softwares, the main thing you’re looking for is an option to ‘change employer details’ followed by a search for any field referencing the Employment Allowance, and a careful read of the options given to you.
To speak with a professional accountant to discuss the new Employment Allowance, and how we help you to take advantage of it, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.