Understanding Employment Allowance: A Guide for Employers

Eligibility Criteria

To qualify for Employment Allowance, your business must meet specific criteria. Your total Class 1 National Insurance contributions for the previous tax year must be less than £100,000. This applies whether you operate as an individual employer or as part of a connected group of companies or charities. In cases where multiple entities are linked,the total Class 1 NI liabilities for the entire group must remain below £100,000, and only one company within the group is permitted to claim the allowance.

Exclusions and Restrictions

While many businesses can benefit from Employment Allowance, there are important exclusions to consider. Employers who meet the following conditions are not eligible:

• Public sector employers where more than 50% of work is for the public sector (unless the entity is a registered charity).
• Companies with only one employee earning above the Class 1 secondary threshold, if that employee is also a director.

Additionally, certain individuals do not count towards headcount eligibility, including:

• Workers whose earnings fall within the IR35 off-payroll working rules.
• Employees in domestic or household roles, unless they are care or support workers.

If your business operates in a sector that receives stateaid, additional considerations may apply, and professional guidance is recommended to ensure compliance.

How to Claim Employment Allowance

If your business qualifies for Employment Allowance, the claim process is straightforward. Once applied, the allowance is automatically offset against your employer’s National Insurance liability each month until either the full £5,000 is utilised or thetax year ends. Employers can track this credit in their P32 report,which details HMRC liabilities.

Final Thoughts

Employment Allowance is a valuable relief designed to support businesses by reducing employment costs. Ensuring eligibility and understanding the exclusions can help employers take full advantage of this benefit. If you need assistance with claiming Employment Allowance or require further payroll guidance, contact Zeus Accountants today.

For further details, you can refer to the official GOV.UKresources:

• Employment Allowance: Check if you're eligible
• Connected companies and Employment Allowance: Further guidance