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The Accountants for Growth

Changes to Employment Allowance

Changes to Employment Allowance
Are you an employer? Do you pay Employer National Insurance contributions for your staff? Employer NI contributions are a cost to the business and are currently* calculated at a rate of 13.8% on any wages over £166 per week per employee aged over 21 years.

Did you know that you could get up to £3,000 a year off your National Insurance bill if you’re an employer? This is the benefit of Employment Allowance.

If your PAYE scheme is eligible, the Employment Allowance is processed through your payroll software allowing you to reduce your employers’ National Insurance each time you run your payroll until either the full £3,000 allowance has been used or the tax year ends (whichever is sooner). The allowance can only be used 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.
Any business or charity that pays employers’ Class 1 National Insurancecan claim Employment Allowance. However, if you/your business have more than one employer PAYE reference, Employment Allowance may only be claimed against one of them.If your business or charity is part of a group, only one entity in the group can claim the allowance.
HMRC have confirmed that you cannot claim Employment Allowance if you fall under any of the following:
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 
According to the 2018 budget set out by the government, from 2020-21, access to Employment Allowance will be limited to businesses and charities with an employer National Insurance contributions (NICs) bill below £100,000. Around 93% of employers claiming the EA will continue to be eligible.
*in the 2019/20 tax year
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