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HMRC internal manual

Compliance Operational Guidance

From
HM Revenue & Customs
Updated
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Supporting Guidance: employer compliance: guidance by subject: employer and contractor’s role: employment allowance

The National Insurance Contributions Bill introduced in October 2013 contained legislation for the creation of the NICs Employment Allowance.

The allowance of up to a maximum amount per year is available to all eligible employers or contractors with a liability to Class 1 Secondary NICs. The allowance will be claimed as part of the normal payroll process through Real Time Information (RTI) from 6 April 2014 and included on the Employer Payment Summary (EPS) see COG904240 to report the reduction.

The maximum value of the allowance per year is:

Period Amount
6 April 2016 to date £3,000
6 April 2014 to 5 April 2016 £2,000

Where an employer pays less than the maximum value of the allowance in NICs then they will pay no NICs at all.

If there are multiple PAYE schemes for the same employer, the Employment Allowance can only be claimed once.

For further information see Testbank - Employment Allowance.

Example

In 2016-17 XYZ Ltd has five employees earning £25,000 per year.

If the employer pays the same salary each month and the monthly employer (secondary) NIC payment is £980.03, the Employment Allowance will be used as follows:

Month Secondary NIC Amount Payable Allowance Remaining
1 £980.03 £0.00 £2,019.97
2 £980.03 £0.00 £1,039.94
3 £980.03 £0.00 £59.91
4 £980.03 £920.12 £0.00
5 £980.03 £980.03 £0.00
6 £980.03 £980.03 £0.00
7 £980.03 £980.03 £0.00
8 £980.03 £980.03 £0.00
9 £980.03 £980.03 £0.00
10 £980.03 £980.03 £0.00
11 £980.03 £980.03 £0.00
12 £980.03 £980.03 £0.00