Employment Allowance

As announced by the chancellor in his 2013 Budget speech, the Employment Allowance is available from 6 April 2014. If you are eligible you can reduce your employer Class 1 NICs by up to £2,000 each tax year.

You can claim the Employment Allowance if you are a business or charity (including Community Amateur Sports Clubs) that pays employer Class 1 NICs on your employees’ or director’ earnings. This means even if you are a “one person” owner managed company you may qualify. Ask us for an opinion.

You can only claim the £2,000 Employment Allowance against one PAYE scheme – even if your business runs multiple schemes.

You can use your own payroll software (see your software provider’s instructions), or HM Revenue and Customs’ (HMRC’s) Basic PAYE Tools to claim the Employment Allowance.

When you make your claim (using the software of your choice), you must reduce your employer Class 1 NICs payment by an amount of Employment Allowance equal to your employer Class 1 NICs due, but not more that £2,000 per year. Care should be taken & professional advice should be sought to ensure that profits are still extracted in the most tax efficient way.

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