Employment allowance

By Tolley
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The following Employment Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Employment allowance
  • Introduction
  • How the employment allowance works
  • Exclusions
  • Other restrictions
  • How to claim
  • Future years
Introduction

The employment allowance is available to most employers, reducing their liability to secondary Class 1 National Insurance contributions (NICs). It is a flat rate reduction in the overall amount that most employers have to pay in secondary NICs in respect of their employees. When introduced, the employment allowance was set at £2,000 but increased to £3,000 from 2016/17 onwards.

It was announced in the Budget 2018 that from April 2020, in order to better target the employment allowance, it will only be available to small businesses. It will apply only to those businesses with a NIC bill of less than £100,000 in the previous year. We expect more detail and draft legislation in 2019.

When an employee’s pay is more than the secondary threshold, the employer has to pay Class 1 secondary contributions in addition to having to deduct Class 1 NICs from the employee’s wages.

YearSecondary threshold (weekly)Secondary threshold (monthly)Secondary threshold (yearly)
2018/19£162£702£8,424
2019/20

More on Rates and thresholds:
Overview of NIC Classes, rates and thresholds
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