Small businesses can now claim up to £2,000 off their employer’s National Insurance bill.
The National Insurance Contributions Employment Allowance, announced in the 2013 Budget, gives employers a tax cut of up to £2,000 per year. It is thought that as many as 1.25 million businesses and charities may be able to benefit from the change.
How does it work?
Under the Employment Allowance businesses can reduce their employer’s National Insurance Contributions by £2,000 per tax year. If your total annual employer’s NICs bill is less than £2,000, with the Employment Allowance you won’t pay anything. If it is over £2,000, you will pay the difference.
The Employment Allowance is not offered as a cash sum. Instead, you receive a ‘discount’ on your tax bill.
Who is eligible?
Almost every business that pays employer Class 1 National Insurance Contributions on employees’ and directors’ earnings is eligible.
There are, however, a few caveats. For example, if your company belongs to a group, only one company in the group can claim. Similarly, if you operate more than one PAYE scheme, you can only claim the allowance against one of those schemes.
There is also a list of further exclusions. You cannot, for example, claim the Allowance if you employ someone for personal, household, or domestic work, or if you carry out functions “either wholly or mainly of a public nature” unless you have charitable status. A full list of excluded employers is available on .GOV.
How do I claim?
You can claim the Allowance directly through HMRC’s Basic PAYE Tools system, or through your own payroll software if you have it. Theoretically HMRC should carry forward your allowance to further tax years, although you should make sure that your details are still correct at the beginning of each year.
If you are exempt from filing HMRC will contact you to let you know how to claim through the paper Employer Payment Summary form.
You should always seek professional advice to ensure that your tax affairs are in order.