16th April 2014
Employers can reduce their national insurance contributions (NICs) from 6 April by claiming a new employment allowance
The allowance of up to £2000 per year can be claimed by a business or charity, including community amateur sports clubs, that pay employer Class 1 NICs on employees’ or directors’ earnings. New guidance on the Gov.uk website explains the allowance in more detail, and how businesses can claim it.
It’s only possible to claim the £2,000 employment allowance against one PAYE scheme, even if a business runs multiple schemes.
The allowance can be claimed through payroll software or HMRC's PAYE software, and by ticking a box on the employer's payment submission under RTI to show that you have submitted a reduced payment equal to the amount claimed in that period.
Claimants must reduce their employer Class 1 NICs payment by an amount of employment allowance equal to employer Class 1 NICs due, but not more than £2,000 per year.
Therefore, if employer Class 1 NICs are £1,200 each month, in April the employment allowance used will be £1,200 and in May £800, as the maximum is capped at £2,000.
The government said that over 90% of the benefit of the employment allowance will go to small businesses with fewer than 50 employees.
Businesses will be able to employ four adults or ten 18-20 year-olds full-time on the national minimum wage without paying any employer NICs.
You need to be aware there are certain rules around eligibility. Please contact our Payroll Manager Jane Watford if you have any queries: firstname.lastname@example.org