By PaperRocket Accounting, Apr 18 2019 08:57AM
Back in April 2014, the NICs Employment Allowance was introduced by the government, “for the purpose of supporting businesses and charities in helping them to grow by cutting the cost of employment”. But what is it, and is your business entitled to claim it?
What is Employers National Insurance?
When a company takes on an employee and pays them a salary, tax and national insurance will be deducted from their income if they exceed the relevant thresholds. As well as the employee having national insurance deducted, the employer will also be subject to national insurance if their salary exceeds the secondary NIC threshold (for 19/20 this is £8,632).
As soon as an employee’s income exceeds this threshold, the employer is required to pay 13.8% National Insurance.
What is the NICs Employment Allowance?
The Employment Allowance can reduce the amount of National Insurance employers have to pay by up to £3,000 each year. If a company qualifies for the scheme, the first £3,000 of employers NI that would have been payable is, essentially, written off. So, provided the company’s Employers NIC bill for the year is less than £3,000, then they will have nothing to pay. If it’s over £3,000, just the difference will be payable.
Does my company qualify?
There are some circumstances in which the Employers NI allowance cannot be claimed, the main example being sole director company’s with only the director on the payroll. If the company has one or more employees, then at least one other person (separate to the director) must be paid above the secondary NIC threshold to qualify.
Equally, the allowance cannot be claimed if you are caught by IR35 or provide services to a public sector body.
How do I claim the allowance?
It really couldn’t be simpler- all you need to do is tick the appropriate ‘yes’ box to claim the allowance when you send your next Employment Payment Summary (EPS) to HMRC. This will automatically calculate and deduct the allowance and the claim will continue until you uncheck the relevant box.
It is worth noting though that the onus is on you to stop claiming the allowance if, at any time, you stop being eligible to claim. If you don’t then you will be receiving a bill for the late payment of employers NI when HMRC realise.
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