Employment Allowance is claimed as part of a
businesses’ HMRC payroll submissions. Since 2014, all eligible employers within
the UK have been able to reduce Class 1 NIC’s by claiming employment allowance
for their company. If claimed, employers are not required to pay the first
£4,000 of employer’s national insurance – a huge saving opportunity for any
Can I claim employment allowance for my business?
If you have never claimed Employment Allowance before,
the good news is you can apply retrospectively for the past 4 tax years, dating
back to the 2016/2017 tax year. Employment Allowance for these prior years was
£3,000 per year, although your small business might actually be entitled to as
much as £12,000 refund from HMRC, coupled with this year’s relief.
Most small businesses are eligible for Employment
Allowance, although there are some exemptions which business owners should be
aware of before applying:
Which small business types are exempt from Employment Allowance?
Class 1 liability over £100,000
- Any small businesses owners with a secondary
employer’s Class 1 NIC liability of £100,000 or more in the prior tax year are
not eligible for claiming Employment Allowance. It is advised that liability
should be calculated by considering connected employers. Should all connected
parties add up to £100,000 or more, no employers within this category would be
- As of 6th April 2020, Employment
Allowance is operated as “de minimis State aid”. This means that employers who
already claim de minimis state aid are required to check that they have
sufficient balance available to make an Employment Allowance claim. If you have
received de minimis state aid, this is something which you should have been
notified about. Should you believe that you have received de minimis state aid
but were not notified, clarify this with your scheme’s administrator.
- Any small business which receives more than
their sectors ceiling or if it would breach their ceiling should Employment
Allowance be granted, then they would not be granted eligibility for Employment
Allowance. The applicable ceiling for most small businesses is EUR 200,000. It
is recommended that small businesses owners verify this over on the HMRC
Single company directors
- If a small business contains only one employee
who is paid over the Secondary Threshold for Class 1 National Insurance
contributions and if they happen to also be the company director, this business
will not be eligible for Employment Allowance.
- Additionally, small businesses with just one
employee will also not be eligible for Employment Allowance.
How to claim Employment Allowance for my small business?
The best way to apply employment allowance for your business
is to entrust this task to a professional accountancy firm. Based in Central
London, Venn Accounts are chartered accountants who specialise in providing
personalised accountancy services for small businesses and startups
With an emphasis on going the extra mile for clients, Venn
Accounts provide an all-encompassing service that is tailor-made for the needs
of small businesses owners. Visit Venn
Accounts website to arrange a consultation for your business.