Employment Allowance
The Employment Allowance scheme allows qualifying businesses and charities in the UK to reduce their annual employer National Insurance liability by up to £5,000. This relief is designed to support employers by reducing their employment costs, making it easier to grow and maintain their workforce. However, claiming it correctly requires careful attention to eligibility, payroll records, and HMRC reporting.
My Tax Consultants offers professional employment allowance services to help businesses benefit from this relief while remaining fully compliant with tax rules. From initial eligibility checks to making accurate RTI submissions, we manage the full process with clarity and precision.
Understanding Employment Allowance
The Employment Allowance is a tax relief aimed at helping smaller employers reduce the cost of employment. Introduced by HMRC to support business growth, it is applied directly through your payroll system, reducing your monthly employer’s Class 1 National Insurance Contributions (NICs) until the full allowance is used.
This scheme is available per business, not per employee. Once successfully claimed, the relief can be carried forward across the tax year or used up within a few months depending on your NICs liability.
It is important to understand that this is not an automatic benefit. You must actively claim the employment allowance through your payroll software or by submitting an Employer Payment Summary (EPS) to HMRC.
Employment Allowance Eligibility
you can claim employment allowance if your business or charity meets all of the following criteria:
- You have employees earning above the Secondary Threshold for Class 1 NICs.
- Your employer NICs bill was under £100,000 in the previous tax year.
- You are not a public body or doing more than 50% of your work in the public sector (with some exceptions).
- You are not employing someone for personal, domestic work unless they are a care or support worker.
- You are not the sole director and the only employee on the payroll who earns above the threshold.
If your organisation operates multiple PAYE schemes, your total employer Class 1 NICs across all schemes must remain under the £100,000 limit to qualify. Failing to comply with these limits can result in HMRC rejecting your employment allowance claim or demanding repayment with penalties.
At My Tax Consultants, we thoroughly assess your business structure, PAYE records, and NICs history to ensure you meet the employment allowance eligibility requirements before proceeding.
How the Allowance is Applied
Once your business is approved for Employment Allowance, the reduction is applied on a monthly basis until the full allowance is used. For example, if your monthly employer NICs bill is £800, you will not need to pay this until your full £5,000 allowance has been applied across relevant months.
If your liability is lower, the relief may be used up over a longer period, potentially lasting until the end of the tax year.
In cases where your NICs for the year are less than £5,000, the remaining balance does not carry forward. For this reason, applying early in the tax year maximises the benefit.
Our employment allowance services include ensuring the allowance is claimed early and integrated into your payroll submissions without errors.
Claiming Employment Allowance Through Payroll
The process for claiming employment allowance involves notifying HMRC through your payroll software. This is done via an EPS submission where the employer declares that they are eligible for the allowance.
If you are not using HMRC-recognised payroll software or you outsource payroll, claims must still be sent in this prescribed manner. Any errors in reporting can lead to delays, rejections, or even compliance checks by HMRC.
At My Tax Consultants, we manage your EPS submissions and maintain a detailed audit trail in case of future reviews. If your allowance has not been claimed in previous years where you were eligible, we can help you recover missed relief by correcting past submissions, where allowed by HMRC.
Impact of Employment Allowance on Other Reliefs
Claiming employment allowance may affect other reliefs or tax treatments. For example:
- If your business is claiming the Research & Development (R&D) tax credit using the SME scheme, you must exclude NICs already covered by Employment Allowance.
- If your organisation claims de minimis state aid, the Employment Allowance may count towards your overall limit, depending on the nature of your business.
- Charities must be careful to assess whether connected charities are jointly exceeding the NICs limit.
These issues require close attention, and our advisers work to ensure that all tax planning and reporting are correctly aligned.
Common Mistakes and How We Help Prevent Them
Some frequent errors made by employers when handling employment allowance claims include:
- Applying when not eligible (e.g. sole director companies with no other employees).
- Missing the deadline for in-year application.
- Failing to correct prior year errors.
- Claiming after crossing the £100,000 NICs threshold without realising it.
We help you avoid these issues by conducting a full eligibility review, confirming your NICs figures, managing all RTI filings, and keeping you updated if your status changes during the year.
Why Use My Tax Consultants for Employment Allowance?
At My Tax Consultants, we support a wide range of employers, including limited companies, small businesses, and charitable organisations. Our employment allowance services are tailored to meet the individual needs of your organisation, backed by up-to-date knowledge of HMRC rules and payroll practices.
We provide:
- Full eligibility assessments based on your company structure and NICs record.
- Setup and configuration of the claim through EPS or your payroll system.
- Review of prior years to identify missed claims.
- Error correction and communication with HMRC if needed.
- Ongoing guidance for future tax years.
By choosing us, you get a clear, accurate, and dependable service to help you manage your employer NICs and make the most of the tax relief available to you.
Ready to Claim Employment Allowance?
Avoid missed savings and filing errors by working with a team that understands the rules and processes from start to finish. Contact My Tax Consultants today to get expert assistance with your employment allowance claim, check your eligibility, and manage your employer National Insurance efficiently.
