The employment allowance is a credit paid by HMRC towards Employers National Insurance. For 2019/2020 this is £3,000.
It was introduced to encourage small businesses to take on employees. And from 6 April 2020, you will only be able to claim the allowance if your Class 1 National Insurance bill was below £100,000 for the tax year 2019/2020.
How to Claim the Employment Allowance
Every time a business runs its payroll reports, a credit is given against Employers National Insurance until the allowance is used up. There is no tax refund for any unused allowance.
You can claim the allowance at any time during the tax year but if you miss out on claiming you can:
- Use the allowance at the end of the tax year against any other taxes you owe such as overdue PAYE, VAT or corporation tax;
- Request a refund from HMRC.
Claiming for Previous Years
If you have missed out on previous claims you can make a retrospective claim dating back to the 205/2016 tax year.
Who Can Claim the Employment Allowance
All businesses and charities with PAYE schemes are entitled to claim the allowance.
You cannot claim if:
- if you have additional PAYE schemes for one business;
- you are the only Director and only Employee of your Limited Company
- if you are a Director with other Employees, at least one of those people must be paying Employers NI in addition to the Director;
- you employ someone for personal, household or domestic work (like a cleaner);
- you are a service Company working under the IR35 rules.