Employment allowance is used to reduce an employer’s NIC liability. You can only claim against your employers’ Class 1 National Insurance liability up to a maximum of £5,000 each tax year. You can still claim the allowance if your liability was less than £5,000 a year.
Are you eligible for employment allowance?
You can claim Employment Allowance if you’re a business or charity (including community amateur sports clubs) and your employers’ Class 1 National Insurance liabilities were less than £100,000 in the previous tax year. You can also claim if you employ a care or support worker.
Connected employers or those with multiple PAYE schemes will have their contributions aggregated to assess eligibility for the allowance. The Employment Allowance can be used against employer Class 1 NICs liability. It cannot be used against Class 1A or Class 1B NICs liabilities. The allowance can only be claimed once across all employer’s PAYE schemes or connected companies.
Employment Allowance Claims
Employment Allowance claims need to be re-submitted each tax year. There are currently a number of excluded categories where employers cannot claim. This includes limited companies with a single director – and no other employees – as well as employees whose earnings are within IR35 ‘off-payroll working rules’.
You can also backdate your claim for the Employment Allowance for the previous four tax years.
The Employment allowance was £3,000 in 2018-19 and 2019-20 and £4,000 in 2020-21 and 2021-22.
Source: HM Revenue & Customs