The Employment Allowance is an annual amount that is currently available to all businesses and charities to offset against their Class 1 secondary NICs bill. It remains at £3,000 for 2019-20.
The scheme was implemented to help stimulate economic growth and encourage small firms to take on more employees. By using the scheme, a company can write off the first £3,000 of its overall Employers’ NIC bill each year.
The Allowance itself is ‘claimed’ each month via the payroll process, as the liability arises. So, no Employers’ NICs are payable until your company’s entire £3,000 allowance has been used up. The Government states that 450,000 small firms benefit from the scheme, with around one-third of them paying no Employers’ NICs at all as a result.
From April 2020 an employer will only be entitled to claim Employment Allowance if that employer had an Employer NIC bill of less than £100,000 in the previous tax year.
Over 99% of micro-businesses and 93% of small businesses will still be eligible for the allowance.
However, regardless of the size of the company, you can’t claim the employment allowance if:
- You’re the director and the only employee paid above the Secondary Threshold
- You employ someone for personal, household or domestic work (like 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 (such as local councils and NHS services) – unless you’re a charity
- You’re a service company working under ‘IR35 rules’ and your only income is the earnings of the intermediary (such as your personal service company, limited company or partnership)