Have you heard of the Employment Allowance claim of £5000?

Employment Allowance allows eligible employers to reduce their National Insurance Liability by up to £5,000.

On a basic level, to be eligible you must:

• Have a prior year Class 1 National Insurance liability below £100,000 in the previous tax year
• You have more than one employee and at least one employee is not a director

If you’re eligible, you will pay less Class 1 National Insurance each time you run payroll until the £5,000 runs out.

De minimis state aid

For some businesses, Employment Allowance counts as ‘de minimis state aid’ (financial support from the government). There’s a limit to how much de minimis state aid these businesses can get over a 3 year period. If they exceed the limit, they cannot claim Employment Allowance.

• De minimis state aid limits are likely to apply to your business if both of the following are true:
• your business is located in Northern Ireland
• your business makes or sells goods or wholesale electricity

How to claim?

Employers can claim through their payroll software; the allowance will be applied when the amount due to HMRC is calculated.

You need to apply for the Employment Allowance every tax year, as early as possible.

If you claim late and do not use your Employment Allowance against your employers’ Class 1 National Insurance liabilities, you’ll have to ask HMRC to do one of the following:

• use any unclaimed allowance at the end of the year to pay any tax or National Insurance you owe (including VAT and Corporation Tax if you do not owe anything on your PAYE bill)
• give you a refund after the end of the tax year if you do not owe anything

You can also claim Employment Allowance for the previous 4 tax years, daring back to 2018/2019. For the tax years 2018 to 2019 and 2019 to 2020, it does not matter how much your employers’ Class 1 National Insurance liability was or how much de minimis state aid you received. The allowance was lower in these years.

At CMA Accountancy, we apply for the Employment Allowance for our eligible employers. Get in touch for any further information!