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Employment Allowance: How to get up to £2,000 off your Class 1 NICs

From 6 April 2014 employers can claim the Employment Allowance and reduce their employer Class 1 NICs.

How does a business claim Employment Allowance?

To make a claim your employer Class 1 NICs payment must be reduced by an amount of Employment Allowance equal to your employer Class 1 NICs due, but not more than £2,000 per year.

For example: your employer Class 1 NICs are £1,200 each month. In April your Employment Allowance used will be £1,200 and in May £800, as the maximum is capped at £2,000.

HMRC then automatically carry your claim forward each new tax year and the employer must inform them of any change in circumstances.

Which employers can claim Employment Allowance?

  • Businesses or charities that pay employer Class 1 NICs on employees’ or directors’ earnings.
  • Despite the exceptions (below) these do include businesses that provide security and cleaning services for a public building, such as government or local council offices, or who supply IT services for a government department or local council
  • If the company belongs to a group (or the charity is part of a charities structure) only one company or charity can claim the allowance.
  • You can only claim the £2,000 Employment Allowance against one PAYE scheme even if your business runs multiple schemes.
  • Service companies can claim the allowance if it pays earnings and has an employer Class 1 NICs liability on these earnings.

Which employers cannot claim Employment Allowance?

  • Personal and Managed Service Companies who pay contract fees instead of a wage or salary may be unable to claim the Employment Allowance, as you cannot claim the allowance for any deemed payments of employment income.
  • Those who employ someone for personal, household or domestic work, such as a nanny, au pair, chauffeur, gardener, or care support worker.
  • Anyone already claiming the allowance through a connected company or charity.
  • A public authority (including local, district, town and parish councils).
  • Any employer who functions either wholly or mainly of a public nature (unless holding charitable status), for example:
  • NHS services
  • GP services
  • the managing of housing stock owned by or for a local council
  • providing a meals on wheels service for a local council
  • refuse collection for a local council
  • prison services
  • collecting debt for a government department

To claim, just contact your account manager today and we’ll get the process rolling.

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