What's the Employment Allowance? And is your organisation eligible?

If you’re an employer, your payroll costs make up a big chunk of your operational expenses. Helping to reduce those labour costs is good news for your cashflow. So, now may be the ideal time to explore the Employment Allowance and find out if you can claim this useful allowance.

We’ll explain the details of the allowance, who’s eligible and how you make a claim.

Employment Allowance: a great way to reduce your payroll costs

Employment Allowance is primarily aimed at businesses and charities that have employees and currently make employers' Class 1 National Insurance (NI) contributions.

Let’s take a look at the main benefits, the rules for eligibility and how you make a claim:

• What’s the Employment Allowance? Employment Allowance helps you cut your payroll costs by reducing your employers’ Nl by £5,000 for the 2022/23 tax year. Once the allowance is applied, you’ll pay no Class 1 NI contributions until you reach the £5,000 threshold. At this point, your NI contributions will revert to the normal rate.
• Who’s eligible for Employment Allowance? To be eligible for Employment Allowance you must be an employer and your employers’ Class 1 National Insurance liabilities for the previous tax year must be less than £100,000. You can claim the allowance if you’re a business or charity (including amateur sports clubs), or a private employer of care or support workers. The allowance can only be claimed for one payroll, or one company, within your group. You must also meet the rules for de minimis state aid.
• How do I claim the Employment Allowance? There are two routes for making a claim for Employment Allowance. You can set up a claim through your HMRC-compatible payroll software and the allowance will be applied every time you submit a payroll return. If you don’t have a compatible payroll solution, HMRC also offers their free Basic PAYE Tools. This software can be downloaded and configured to automatically apply the cut to your employers’ Class 1 NI contributions. Either route is relatively simple to set up and will automate the whole process of reducing your labour costs.

Talk to us about making an Employment Allowance claim

£5,000 of cash to reinvest back into your business is an opportunity that shouldn’t be missed. And the additional bonus is that you can make retrospective claims for the Employment Allowance, going back to the 2018/19 tax year.

If you’ve never applied for this helpful allowance, now’s the time to make a claim and start making a tangible difference to your payroll costs and available cashflow.