The Employment Allowance allows eligible employers to reduce their National Insurance liability. The allowance increased to £4,000 (was £3,000) from 6 April 2020. An employer can claim less than the maximum if this will cover their total Class 1 NIC bill.
The allowance is only available to employers that have employer NIC liabilities of under £100,000 in the previous tax year. Connected employers or those with multiple PAYE schemes will have their contributions aggregated to assess eligibility for the allowance. The Employment Allowance can be used against employer Class 1 NICs liability. It cannot be used against Class 1A or Class 1B NICs liabilities. The allowance can only be claimed once for all employer’s PAYE schemes or connected companies.
Since April 2020, Employment Allowance claims will also need to be submitted each tax year. This means that claims will not automatically roll over from the previous tax year as was previously the case. There are currently a number of excluded categories where employers cannot claim the employment allowance. This includes limited companies with a single director and no other employees as well as employees whose earnings are within IR35 ‘off-payroll working rules’.