Business Advice, Finance

Are You Eligible for the Employment Allowance?

Business Advice | 3 February 2023 | 1 year ago

With the employment allowance, some businesses and employers are able to reduce their annual National Insurance liability. Below, we have taken a look at which businesses are eligible to do so.

What is the Employment Allowance?

It’s possible to reduce your liabilities by up to £5,000, saving you a lot of money as a business. By claiming employment allowance, you will pay less employers’ Class 1 National Insurance each time you do your payroll. This can be done until the £5,000 has gone or the tax year ends, whichever comes first.

How Does it Work?

There are a lot of costs associated with running a business, and Class 1 National Insurance costs are one of the largest outgoings for small businesses. With employment allowance, you can reduce the amount of Class 1 National Insurance you pay on behalf of your employees. This can be done each tax year, and you can reduce your Class 1 National Insurance liabilities by up to £5,000 each tax year. If your Class 1 National Insurance liabilities are less than £5,000 you can still claim, though the amount will be lower. Not all businesses are eligible to claim employment allowance, so it’s important to check the criteria.

Are You Eligible?

Employment allowance eligibility can be confusing, as not all businesses are able to claim it. You are eligible to claim employment allowance if you are a business or charity, and your employers’ Class 1 National Insurance liabilities were less than £100,000 in the previous tax year. This includes community amateur support clubs and those who employ a care worker or support worker. If you are part of a group of companies or charities, the total employer’s Class 1 National Insurance liabilities for the entire group must be less than £100,000.

You cannot claim employment allowance if you’re a public body, or if more than half of the work you do is in the public sector, unless you are a charity. Employment allowance eligibility criteria also states that you cannot claim if you are a company with online one employee paid above the Class 1 National Insurance threshold. You also cannot claim if the employee is also a director of the company.

How You Can Claim

You can claim employment allowance at any point in a tax year as part of the real time information submission. You can do this using your own payroll software or via HMRC.

Not all employees can be included in an employment allowance claim, including anyone whose earnings are within the IR35 rules. You also can’t include anyone you employ for personal, household or domestic work – such as a nanny, cleaner or gardener – unless they are a care worker or support worker.

Sign up to our newsletter to get the latest from Business Advice.

Related Topics

Exploring the Immersive World of VR Development: Applications and Opportunities
25 September 2023

Exploring the Immersive World of VR Development: Applications and Opportunities

Read More →
The Importance of Data Analytics in Making Informed Business Decisions
14 September 2023

The Importance of Data Analytics in Making Informed Business Decisions

Read More →
Financial Planning for Small Business Owners
11 September 2023

Financial Planning for Small Business Owners

Read More →
Navigating Financial Challenges: 5 Tips for SMEs
17 August 2023

Navigating Financial Challenges: 5 Tips for SMEs

Read More →
What is Debt Financing?
14 August 2023

What is Debt Financing?

Read More →
What is Straight Line Depreciation and Why is it Important?
11 August 2023

What is Straight Line Depreciation and Why is it Important?

Read More →

If you enjoy reading our articles,
why not sign up for our newsletter?

We commit to just delivering high-quality material that is specially crafted for our audience.

Join Our Newsletter