Employment allowance

By Tolley

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 NIC It is a flat rate reduction in the overall amount that most employers have to pay in secondary NIC in respect of their employees When introduced the employment allowance was set at 2 000 but increased to 3 000 from 2016 17 onwards The Government set out a range of proposed tax changes in its 2019 election manifesto including to increase the employment allowance from 3 000 to 4 000 See the Tax planning considerations prior to Budget 2020 news item 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 More details were provided in Employer Bulletin 80 October 2019 confirming that the previous tax year s total employers ie secondary NIC liability must be less than 100 000 claims will need to be submitted every year and cannot be rolled over from one year to the next When anemployee s pay is more than the secondary threshold the employer has to pay Class 1 employer NIC in addition to having to deduct Class 1 NIC from the employee s wages Year Secondary threshold weekly Secondary threshold monthly Secondary threshold yearly 2018 19 162 702 8 424 2019 20 166 719 8 632 The current 2019 20 rate of secondary NIC due is 13 8 of any amount of the employee s pay over the Secondary threshold This secondary contribution is calculated and paid over to HMRC as part of the employer s normal PAYE operations using the Real Time Information RTI system See the Overview of NIC Classes rates and thresholds guidance note for more about NIC on employment income HMRC has published free standing guidance on eligibility for the employment allowance and how to claim it as well as information on how the rules

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