Running a business comes with its share of financial obligations, including National Insurance contributions. However, if you’re an eligible employer, the Employment Allowance can help you reduce your annual National Insurance liability by up to £5,000—a valuable saving that can free up funds for other business needs.
What Is Employment Allowance?
Employment Allowance is a government initiative that allows small businesses, charities, and community amateur sports clubs to lower their employers’ Class 1 National Insurance contributions. This reduction is applied automatically through payroll processing until the full £5,000 allowance is used or the tax year ends.
Who Can Claim?
You may be eligible if: ✅ Your business or charity has an employers’ Class 1 National Insurance liability of less than £100,000 in the previous tax year. ✅ You employ a care or support worker. ✅ You are claiming for the current or any of the previous four tax years.
If you’re part of a group of companies, only one business within the group can claim, and the total National Insurance liability for the group must be below the £100,000 threshold.
Who Cannot Claim?
❌ Public sector bodies (unless they are charities). ❌ Companies with only one director and no other employees. ❌ Employers of off-payroll workers under IR35 rules.
How to Claim
Claiming is simple! If you use payroll software, select ‘Yes’ in the Employment Allowance indicator field when submitting your Employment Payment Summary (EPS) to HMRC. If your software lacks this option, HMRC’s Basic PAYE Tools can be used instead.
For businesses affected by de minimis state aid rules, you must declare your sector and ensure you remain within the allowable state aid limits.
Why Claim Early?
The sooner you claim, the quicker you’ll see the benefit! If you don’t use the full allowance, you can request HMRC to apply the unused amount to other tax liabilities or receive a refund at the end of the tax year.
Claim for Past Years
You can backdate claims for up to four tax years:
- 2022–2024: £5,000 per year
- 2020–2022: £4,000 per year
This is a great opportunity to recover missed savings! Get in touch with AccelUS today!
Final Thoughts
Employment Allowance is a fantastic way for small businesses and charities to cut costs and improve cash flow. If you haven’t claimed yet, check your eligibility and start benefiting from this valuable tax relief today!
