The Employment Allowance was introduced in April 2014 for employers who pay Employers NIC. It is an allowance which negates the need to pay Employers NIC until the full amount has been claimed. The Employment Allowance is worth £2,000 to employers but they must apply for the Allowance but this is done easily through payroll software. If payroll is outsourced employers should ensure that this allowance has been claimed on their behalf.
The Employment Allowance will be available again for 2015-16 allowing employers to save a further £2,000 against their employers NIC.
The Employment Allowance can be claimed any time during the tax year but if you don't use it you lose it. If you claim late and don't use your Employment Allowance against the Class 1 National Insurance you have paid you can ask HMRC to do one of the following:
- use the unclaimed allowance against any tax, National Insurance or VAT that you owe
- give you a refund after the end of the tax year if you don't owe anything.
Employers have a right to claim this Allowance and should therefore use it through the payroll, claim for it to be set against other taxes owed or request a refund after the end of the tax year.
However you can only claim to the value of the Employers NIC due during the year. If your Employers NIC is less than £2,000 for the year you will not be able to claim the balance.
The Employment Allowance was not available to employers employing personal staff such as gardeners, nannies or care support workers, however from April 2015 the Employment Allowance can be claimed for tcare and support workers, although not for gardeners.
Other types of business which cannot claim the Employment Allowance are service companies who work under IR35 and companies doing more than half their work in the public sector (such as with councils or the NHS) . Charities or businesses with more than one entity can only claim for a single charity or single business.