The Employment Allowance was introduced in 2014/15 and can be claimed by most businesses that pay secondary Class 1 National Insurance on their employees.
The Employment Allowance for 2022/23 is £5,000. It has to be claimed each year and is set against Employers National Insurance Contributions.
Employers or their payroll provider make a claim for the Employment Allowance through payroll software and by doing so confirm that they are eligible to claim the allowance.
Employers then pay less Employers NI throughout the year until the allowance has been used or the tax year has ended.
Who is Eligible to Claim The Employment Allowance?
Most businesses who have employees are eligible:
- Limited Companies
- Charities including private businesses with charitable status such as schools, academies and further education providers
- Community amateur sports clubs
- People who employ a care and support worker. Eligibility criteria can be found on the government website.
Which businesses are not eligible to Claim The Employment Allowance?
There are some businesses who do not qualify for The Employment Allowance.
- Single director companies where the director is the only employee
- Businesses whose Class 1 National Insurance liabilities in the previous tax year were more than £100,000
- Only one of connected companies or charities can claim.
Connected Company or Charity Eligibility
Companies are connected for the purposes of The Employment Allowance if a company has control over another or they are under the control of the same person/people.
The directors/trustees of these connected companies can choose which is to make the claim.
Charities are connected if the same person or connected people control two or more charities and the charities share the same (or substantially similar) purpose and activities, or if they belong to a group of charities.
For guidance on connected businesses and The Employment Allowance speak to us or see government guidance.
Is Employment Allowance State Aid?
The Employment Allowance counts towards the total de minimis State Aid a business is allowed to get over a three-year period.
Employers who exceed the State Aid threshold for their sector cannot claim. It is likely that most general businesses will not be affected by these rules due to the £200,000 limit however, for those in certain sectors such as agriculture (£20,000) or fisheries (£30,000), the lower limits could affect their entitlement.
You can check with the government if you qualify for The Employment Allowance or contact us. You may be able to claim back up to 4 years to 2018/19 and for the tax years 2018/19 and 2019/20 the Employers NI and de minimis state aid limits do not apply. The Employment Allowances going back were as follows:
- £3,000 per year between 6/4/16 and 5/4/20
- £4,000 per year between 6/4/20 and 5/4/22