What is the Employment Allowance?
As of the 6th of April 2014, Businesses, Charities and Community Amateur Sports Clubs (CASCs) who have employees whose salaries incur Class 1 National Insurance Contributions can reduce the amount of National Insurance paid in employer contributions by the organisation by up to a maximum of £2000. This is an Allowance which businesses and charities may use up to the limit every tax year.
This means that if the organisation has less than £2000 in NIC liability in a tax year then the organisation will not make any secondary Class 1 payments. If the organisation has NIC liabilities greater than £2000 then it will pay a reduced amount off set by the allowance.
Who is Eligible for the Employment Allowance?
All Charities, Businesses and CASCs that pay secondary Class 1 National Insurance Contributions on the earnings of their employees or their directors can claim the Employment Allowance. Organisations can claim the full allowance of £2000 against their NIC liability. If your organisation is part of a group of charities then only one of the organisations can make a claim. The allowance can only be used to offset one PAYE scheme per organisation.
Self-employed people can also claim Employment Allowance, provided they are liable to pay NICs on their earnings.
How do I claim the Employment Allowance?
Your Payroll administrator will be required to fill out the relevant field in the Employment Payment Summary in your return to HRMC. You only require to claim Employment Allowance once. If you are no longer eligible for any reason you will indicate this in a future Employment Payment Summary. The Employment Allowance can be claimed at any time throughout the tax year, click here for further information on claiming during the tax year.
An organisation can track their use of the Allowance via their HRMC online account.
Employment Allowance Calculator
You can use the Governments Employment Allowance Calculator which will let you see how the allowance could affect your organisations National Insurance Contributions.
More information on this allowance is available at Gov.uk – Employment Allowance