HMRC’s latest statistics on Employment Allowance serve as a reminder of the importance of this support to employers, and the importance of understanding your eligibility to claim.
Around 1,171,000 employers benefitted from the Employment Allowance in the 2022-23 tax year – an increase of 2% on 2021-22 – with numbers of employers claiming the allowance highest in London and the South East.
The wholesale and retail, repair of motor vehicles and motorcycles, construction and professional, scientific and technical activities sectors, when combined, make up around 42% of all employers benefitting from the allowance.
However, it’s likely that there are still many businesses who do not realise they are eligible to claim, or are unaware of the allowance altogether.
How do I know if I’m eligible for the Employment Allowance?
You can 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.
Be mindful that if you are part of a group, or run more than one payroll, the £100,000 threshold applies to the whole group, or all payrolls, and only one payroll in the group can claim the allowance.
You cannot claim the Employment Allowance if you’re a public body or business doing more than half your work in the public sector (such as local councils and NHS services) – unless you’re a charity.
You also cannot claim if both of the following are true:
- you’re a company with only one employee paid above the Class 1 National Insurance secondary threshold
- the employee is also a director of the company
It is also the case that certain employees cannot be included in your claim, such as:
- someone whose earnings are within IR35 ‘off-payroll working rules’
- someone you employ for personal, household or domestic work (like a nanny or gardener) – unless they’re a care or support worker
You can read more about Employment Allowance eligibility criteria on the GOV.UK website, here.
What is the Employment Allowance?
The Employment Allowance allows eligible employers to reduce their annual National Insurance liability by up to £5,000 each tax year.
You’ll pay less employers’ Class 1 National Insurance each time you run your payroll until the £5,000 has been used up, or the tax year ends (whichever comes first).
In order to benefit from the Employment Allowance, you need to put in a claim for it each tax year. You can do this at any point in the tax year, but the earlier you do so, the sooner you’ll receive the allowance.
As well as claiming for the current tax year, you can also claim Employment Allowance for the previous four tax years, dating back to 2018-19.
How can GH Payscheme help?
If you think you meet the necessary criteria to make a claim for Employment Allowance, but you are unsure where to start, or if you need wider support with outsourcing your payroll, contact our dedicated, BACS-approved payroll bureau today.