Claiming the employment allowance – it’s not too late
When the employment allowance was first introduced in April 2014, 20% of qualifying employers failed to make a claim within the first year.
The good news is that employers have up to four years after the end of the tax year to make a claim. So, an employer has until 5 April 2019 to claim the employment allowance for the 2014/15 tax year.
How does it work?
Since the employment allowance was introduced in April 2014 employers can claim up to £3,000 off their employers Class 1 National Insurance bill each year.
The initial allowance of £2,000 per year was increased to £3,000 per annum in April 2016. The 2016 increase means businesses can employ one worker at an annual salary of £29,500 or up to three workers, full time (based on a 40 hour week), on the new National Living Wage (NLW), without encountering any employee National Insurance Contributions.
An employer should only need to claim the allowance once. HMRC will store the claim and automatically carry it forward to the next year. It is the employer’s responsibility to inform HMRC of any changes in future years.
If you are a WMT payroll client, we will take care of this for you, claiming the allowance if you are entitled to it and advising HMRC of any changes that affect your eligibility.
Who can claim?
The Employment Allowance was introduced to support businesses with the cost of employing staff and help stimulate job creation. Although predominantly aimed at small businesses, the allowance is available to all businesses, charities and community amateur sports clubs.
However, there are exceptions. Domestic workers such as gardeners, nannies and au pairs cannot be included. Organisations carrying out 50% or more of their work in the public sector are also ineligible, unless they are providing certain outsourced services. It is best to check with your accountant or HMRC if in any doubt.
If you are a sole trader, or in a partnership and don’t employ any staff then you are not classed as an employer therefore not entitled to the allowance.
Connected companies and charities
Where businesses or charities are connected to other companies, through a group or through a connecting person, only one company will be entitled to claim the allowance. More information on connected companies can be found on the HMRC website.
Another change announced in the 2016 budget was that from April 2018, any employer who has received civil penalties for hiring illegal workers will have their employment allowance removed for one tax year.
If you think that you are eligible to claim employment allowances, but are yet to do so, now is the time.
For advice on your eligibility and making a claim contact Susan Elsdon.