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Employment Allowance

If you run your own payroll make sure you are claiming Employment Allowance.

Employment Allowance (EA) is a Government initiative that reduces an employer’s National Insurance Contributions (NICs) by up to £2,000 per year.  It was introduced in April 2014 and has continued in to the current tax year 2015/2016, and looks set to carry on for the foreseeable future.  As mentioned in the interim Summer Budget in July, it is set to increase to £3,000 per year from April 2016.

You are eligible to claim Employment Allowance if you are:

  • a business, or charity, paying Class 1 National Insurance contributions on your employees’ and directors’ earnings
  • employing a care or support worker

You are not eligible to claim if you are:

  • a public body or business doing more than half your work in the public sector (excluding charities)
  • employing someone for personal, domestic or household work

Only one company can claim if you are part of a group, and you can only claim for one PAYE scheme.

To claim EA you simply need tick the EA indicator field in your payroll software when you send your Employment Payment Summary (EPS).  This informs HM Revenue & Customs (HMRC) that you are claiming it and they will then automatically carry the claim forward to the next tax year.

Don’t worry if you have not yet claimed EA for this tax year as you can claim at any time.  If you do claim late, and don’t use your full EA against your Class 1 employer’s NICs, HMRC will use the balance against any PAYE liabilities.  If you don’t owe anything at all you should write to HMRC and request a refund.

If you didn’t claim Employment Allowance for the 2014/2015 tax year but were entitled to it, you can still claim.  You just need to send an EPS for the specific tax year for which it is being claimed.  If you do not request that HMRC refunds this amount directly to you they will use it to offset against existing/future PAYE liabilities.

Our Employer Services team are on hand to help you with any payroll related queries you have, contact them on 01228 711888. 

Posted: August 17th, 2015

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