Who is eligible for employment allowance?

16th September 2019

Who is eligible for employment allowance?

From April 2020, HMRC is introducing new rules for claiming employment allowance. Read on to find out who is eligible for employment allowance and how to claim under the new processes. 

Who is eligible for employment allowance

What is employment allowance?

Employment allowance is a scheme designed to help SMEs and encourage them to recruit more staff. It is currently considered a form of State Aid because it could give some businesses an advantage for trade within the European Union, however this could change following Brexit. Under the scheme, eligible companies can claim up to £3,000 off their National Insurance contributions (NICs) bills every year.

Who is eligible for employment allowance?

Currently, all businesses and charities paying Class 1 Employers’ National Insurance are eligible to receive employment allowance, however new rules are being introduced from 5th April 2020 which are expected to affect approximately 100,000 organisations.

Regardless of the changes, the following are not eligible for employment allowance:

  • Company directors who are the only employees paid above the secondary threshold (£8,632 for 2019/20)
  • People employing staff for domestic/personal work (e.g. cleaner, nanny), with the exception of care/support workers
  • Public bodies or businesses whose staff carry out more than 50% of their work in the public sector, with the exception of charities
  • Companies working under IR35 rules whose only income is via an intermediary (e.g. your personal LLP)

Changes from 5th April 2020

From 5th April 2020, employment allowance will only being available to businesses and charities whose NICs bills were below £100,000 in the previous tax year. This means that larger companies will no longer be able to claim. Employers claim manually each month via their payroll software or HMRC’s basic PAYE tools, so if you’re no longer eligible it’s important to remember to uncheck the ‘eligible for employment allowance’ box.

Talk to the experts

This guide provides an introduction to employment allowance but if you have any questions about employment allowance or other aspects of payroll our expert team are always on hand to offer advice and support. You can get in touch with us here.

Information correct at time of publication September 2019.

Chartered Accountants in Sunderland, offering expertise on everything from Tax and Business Planning,
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