From 6 April 2020, the Employment Allowance is set to increase from £3,000 to £4,000. Eligible businesses can offset this allowance against their liability for Employer’s National Insurance contributions in the 2020/21 tax year. The allowance has to be claimed by the employer, but this will normally be dealt with through submissions from payroll software.
As in previous years, companies where the sole employee is a director will not be eligible for the allowance. A business also cannot claim the allowance if their total Class 1 National Insurance contributions for the relevant year are £100,000 or more. Where a group of companies are connected, this test applies to the whole group. If the test is passed, the group must elect which member should receive the allowance.
The Employment Allowance also qualifies as state aid. This means it counts towards the state aid cap still in force under agreements with the EU. If your business receives other support from the government, please get in touch so we can check whether this affects you.
Where appropriate we will be claiming Employment Allowance on behalf of our payroll clients. If you need assistance with this or any other payroll matters please contact us on 01892 807001.