Did You Claim Employment Allowance?

Historical NIC Employment Allowance claims still possible

In the Budget of 2013, the then Chancellor of the Exchequer, George Osborne, announced that as from 6th April 2014 employers would be entitled to claim an Employment Allowance of £2,000 a year as a reduction in their Class 1 secondary (employers’) NIC liability (not against Class 1A or 1B).

At the time it was introduced the Employment Allowance was expected to benefit 1.25 million businesses, 98% of which were SME’s with fewer than 250 employees. It was anticipated that the allowance would wipe out the NIC bill of 450,000 small employers and one third of employers would pay no employers NIC at all.

For 2014/15 and 2015/16 the Employment Allowance was worth £2,000, meaning that every business could employ someone on a salary of £22,400 and £22,600 respectively without attracting employers NIC.

PSC’s within IR35 could claim the allowance only against employers NIC due on actual payment of earnings. The NIC due in respect of the 5th April deemed payment is not covered by the allowance.

Then in the summer Budget 2015 it was announced that the allowance would increase to £3,000 but at the same time would be withdrawn for one employee (or director) companies. Clearly this affected the majority of PSC’s.

Changes from 6th April 2016

From 06.04.16, limited companies where the director is the only employee paid earnings above the employers threshold for Class 1 NIC are no longer able to claim the Employment Allowance. This was designed to dissuade a sole director from employing their spouse and paying them the equivalent of the lower limit for NIC to qualify for the allowance.

However, the knock on effect of this is that a company that has a number of employees and a sole director, and the director is the only person paid above the employers NIC threshold, is no longer able to claim the Employment Allowance.

Not too late to claim

In 2014/15 only around 80% of qualifying employers made an initial claim for the Employment Allowance. If you were one of those, then all is not lost as you have up to four years after the end of the tax year to make a claim. So, for 2014/15, you have until 5th April 2019 to claim what is rightfully yours.

To do so, submit an Employer Payment Summary (EPS) via RTI reporting and enter the year for which the claim relates to. HMRC should then issue the employer with the appropriate repayment of NIC but do remember you will have had to have paid at least £2,000 employers NIC for the relevant year to be able to reclaim the maximum allowance.

If you want to learn more about Employment Allowance, please get in touch with one of our experts.

More Posts

Basis Period Reform

The article helps self-employed sole traders and partnerships to understand how basis period reform will impact their business in the 2023/24 transitional tax year, and what steps need to be taken to ensure they do not lose any brought forward tax reliefs and remain compliant!

George Ian Hope

Tax Payment Dates and Estimating the Values of Tax Payable

The article outlines the typical tax payment dates and methods of estimating the values of tax payable for each type of tax, including VAT, PAYE, NIC, CIS, Corporation Tax, and Dividend and Personal Taxes.

George Ian Hope

Corporation Tax Rate Changes

In the March 2021 Budget Rishi Sunak proposed a number of changes to the way that Corporation Tax will be calculated and applied and these changes will come into effect from 1st April 2023.

George Ian Hope