Employment Allowance

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Employment Allowance

You could get up to £2,000 a year off your National Insurance bill if you’re an employer.

What you’ll get

The allowance will reduce your employers’ (secondary) Class 1 National Insurance each time you run your payroll until the £2,000 has gone or the tax year ends (whichever is sooner).

You can only claim against Class 1 National Insurance you’ve paid, up to a maximum of £2,000 each tax year. You can still claim the allowance if you pay less than £2,000 a year.

Eligibility

You can claim Employment Allowance if:

You can only claim Employment Allowance for one PAYE scheme.

If you’re part of a group, only one company or charity in the group can claim the allowance.

You can’t claim if:

  • you employ someone for personal, household or domestic work (eg a nanny or gardener) - unless they’re a care or support worker
  • you’re a public body or business doing more than half your work in the public sector (eg local councils and NHS services) - unless you’re a charity
  • you’re a service company with only deemed payments of employment income under ‘IR35 rules’

How to claim

To claim through your payroll software, put ‘Yes’ in the ‘Employment Allowance indicator’ field next time you send an Employment Payment Summary (EPS) to HM Revenue and Customs (HMRC).

If you use HMRC’s Basic PAYE Tools:

  1. Select the correct name in the ‘Employer’ menu on the home page.

  2. Select ‘Change employer details’.

  3. Select ‘Yes’ in the ‘Employment Allowance indicator’ field.

  4. Send your EPS as normal.

You only need to claim Employment Allowance once. If you stop being eligible, select ‘No’ in the ‘Employment Allowance indicator’ field in your payroll records.

When to claim

You can claim at any time in the tax year.

If you claim late and don’t use your Employment Allowance against the Class 1 National Insurance you’ve paid, you’ll have to ask HMRC to do one of the following:

  • use any unclaimed allowance at the end of the year to pay any tax or National Insurance you owe (including VAT and Corporation Tax if you don’t owe anything on your PAYE bill)
  • give you a refund after the end of the tax year if you don’t owe anything

You can see how much Employment Allowance you’ve used in your HMRC online account.

You can claim Employment Allowance for a previous tax year, dating back to 2014 to 2015 if you’re a business or charity - read ‘Claiming Employment Allowance: further employer guidance’ for more information.

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