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Get up to £2,000 off your Employers National Insurance

As from 6 April 2014, employers can claim the Employment Allowance and reduce their employer Class 1 NIC by up to £2,000.

Who Can Claim?

You can claim the Employment Allowance if you are a business or charity that pays employer Class 1 NIC on your employees’ and directors’ salaries.

You can only claim the £2,000 allowance against one PAYE scheme, even if your business runs multiple schemes. Note that if a company operates more than one PAYE scheme, if there is any unused Employment Allowance, and you have paid Class 1 NIC on the other scheme, you can apply (at the end of the tax year) for a refund of the unused allowances (up to any Class 1 NIC paid).

In addition, if your company is part of a group of companies, only one company can claim the allowance – you must decide which company will make the claim.

Excluded Employers

Unfortunately, not all employers can claim the allowance. For example, you cannot claim if you:

  • Employ someone for personal, household or domestic works (e.g. nanny)
  • Are a public authority, including district and parish councils
  • Carry out functions either wholly or mainly of a public nature, for example:
    • NHS services
    • GP services
    • Managing housing stock for local councils
    • Refuse collection for local council
    • Collecting debt for government departments
    • Personal & Managed Service companies who pay contract fees instead of a salary

How to Claim the Employment Allowance

You can use your own payroll software, or HMRC’s basic tools to claim the allowance.

When making the claim, you must reduce your employer Class1 NIC payment by an amount of Employment Allowance equal to your Class 1 liability, but only up to the £2,000.

For example, if your monthly employers Class 1 NIC is £1,400, in April 2014 you can reduce this liability to £nil.

The unused allowance is then carried forward and the Class 1 liability for May 2014 would be reduced to £800 (i.e. £1,400 less the £600 brought forward allowance).

You will be able to see how much of the allowance you have used on HMRC’s online services.

If you have any queries regarding the Employment Allowance, please do not hesitate to contact a member of Dodd & Co on 01228 530913 or 01768 864466.

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