You could get up to £3,000 a year off your National Insurance bill if you’re an employer.
Employment Allowance is changing. From 6 April 2020 you will only be able to claim if your Class 1 National Insurance bill was below £100,000 in the previous tax year.
What you’ll get
The allowance will reduce your employers’ (secondary) Class 1 National Insurance each time you run your payroll until the £3,000 has gone or the tax year ends (whichever is sooner).
You can only claim against Class 1 National Insurance you’ve paid, up to a maximum of £3,000 each tax year. You can still claim the allowance if you pay less than £3,000 a year.
You can claim Employment Allowance if you’re a business or charity (including community amateur sports clubs) paying employers’ Class 1 National Insurance.
You can also claim if you employ a care or support worker.
If you have more than one employer PAYE reference, you can only claim Employment Allowance against one of them.
If you’re part of a group, only one company or charity in the group can claim the allowance.
You cannot claim if:
- you’re the director and the only employee paid above the Secondary Threshold
- you employ someone for personal, household or domestic work (like a nanny or gardener) - unless they’re a care or support worker
- you’re a public body or business doing more than half your work in the public sector (such as local councils and NHS services) - unless you’re a charity
- you’re a service company working under ‘IR35 rules’ and your only income is the earnings of the intermediary (such as your personal service company, limited company or partnership)
How to claim
To claim through your payroll software, put ‘Yes’ in the ‘Employment Allowance indicator’ field next time you send an Employment Payment Summary (EPS) to HM Revenue and Customs (HMRC).
If you use HMRC’s Basic PAYE Tools:
Select the correct name in the ‘Employer’ menu on the home page.
Select ‘Change employer details’.
Select ‘Yes’ in the ‘Employment Allowance indicator’ field.
Send your EPS as normal.
You only need to claim Employment Allowance once. Your claim will continue until you stop it.
Stopping your claim
If you stop being eligible, select ‘No’ in the ‘Employment Allowance indicator’ field in your next EPS.
Do not select ‘No’ just because:
- you’ve reached the £3,000 limit before the end of the tax year - this does not make you ineligible
- you’re no longer employing anyone - wait until the next tax year, then select ‘No’
If you stop your claim before the end of the tax year (5 April), any allowance you’ve been given that year will be removed. You’ll have to pay any employers’ Class 1 National Insurance due as a result.
When to claim
You can claim at any time in the tax year.
If you claim late and do not use your Employment Allowance against the Class 1 National Insurance you’ve paid, you’ll have to ask HMRC to do one of the following:
- use any unclaimed allowance at the end of the year to pay any tax or National Insurance you owe (including VAT and Corporation Tax if you do not owe anything on your PAYE bill)
- give you a refund after the end of the tax year if you do not owe anything
You can see how much Employment Allowance you’ve used in your HMRC online account.
Claiming for past years
You can claim Employment Allowance for a previous tax year, dating back to the 2015 to 2016 tax year. Employment allowance was £2,000 before April 2016.
Read ‘Claiming Employment Allowance: further employer guidance’ for more information.