Employer's National Insurance Allowance for small businesses

What is it and how does it work?

You could get up to £3,000 a year off your National Insurance bill if you’re an employer.

What you’ll get

The allowance will reduce your employers’ (secondary) Class 1 National Insurance each time you run your payroll until the £3,000 has gone or the tax year ends (whichever is sooner).

You can only claim against Class 1 National Insurance you’ve paid, up to a maximum of £3,000 each tax year. You can still claim the allowance if you pay less than £3,000 a year.

Eligibility

You can claim Employment Allowance if you’re a business or charity (including community amateur sports clubs) paying employers’ Class 1 National Insurance.

You can also claim if you employ a care or support worker.

If you have more than one employer PAYE reference, you can only claim Employment Allowance against one of them.

If you’re part of a group, only one company or charity in the group can claim the allowance.

You can’t claim if:

  • you’re the director and the only paid employee in your company
  • you employ someone for personal, household or domestic work (eg 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 (eg 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 (eg your personal service company, limited company or partnership)

How to claim

To claim through your payroll software, put ‘Yes’ in the ‘Employment Allowance indicator’ field next time you send an Employment Payment Summary (EPS) to HM Revenue and Customs (HMRC).

Catherine Pinkney

Posted on Thursday 3 Nov, 2016, 3 years ago

August 15, 2019

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