5 September 2017

Employment Allowance: A reminder of the changes

We provide an update on the current Employment Allowance, taking into account the changes that were brought in last April.

What is the Employment Allowance?

The Employment Allowance was introduced on 6 April 2014 as a means of supporting businesses and charities, ultimately encouraging employment and helping them grow. The allowance enables eligible employers to reduce their National Insurance Contributions (NICs) bill by up to £3,000 a year.

The allowance is claimed each month through the payroll process and operates by reducing the employer’s NIC monthly charge until the year’s allowance has been used up. Only employers who pay Class 1 NIC can claim the allowance. This means that the self-employed are unable to claim, as they pay Class 2 and Class 4 NIC.

If you haven’t yet claimed, it’s not too late

Whilst the introduction of the allowance was well-published, it seems the take-up was not quite as comprehensive as expected, particularly by large companies. However, as there is a four year time limit for claiming the allowance, it is often possible to make catch-up claims for any omitted years.

Some recent changes to be aware of

Several changes were introduced with effect from 6 April 2016, including an increase in the allowance from £2,000 to £3,000.

The more controversial change, which took effect from the same date, is that the allowance is no longer available for single director companies. This is also the case where there might be other employees of the company who are paid under the secondary Class 1 NIC threshold of £157 per week. Consequently, in order for single director companies to be eligible for the allowance, there must be at least one employee paid above the threshold in addition to the director.

If you have any questions about this allowance or how you can benefit, please do not hesitate to contact David Boyd. 

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