Employers with an annual employer’s National Insurance Contributions (NIC) liability of less than £100,000 in the previous tax year can claim to reduce their liability by the employment allowance (currently £5,000) per tax year.
Most employers qualify although there are some exclusions, for example, the allowance cannot be claimed by companies with a single director / employee or by public sector employers.
Connected employer companies can only claim a single employment allowance between them. Broadly speaking, companies are connected if one controls the other or both are under common control.
How do employers make a claim for the Employment Allowance?
Employers effectively self-certify their eligibility to the allowance by submitting an Employer Payment Submission (EPS) via RTI, then the allowance is simply offset against the employers’ monthly employer NIC liability.
What if we have missed this in previous years?
Unused allowances (i.e. because there is insufficient employer NIC liability in the year) cannot be carried forward / back to future / previous tax years. However, backdated claims can be made for the four previous tax years. The previously unclaimed allowances can either be offset against future PAYE liabilities or repaid.
As the allowance must be claimed, it can easily be missed so eligible employers should check that they have had the benefit to which they are entitled. We have come across instances where this has been missed which have given rise to a welcome windfall for the clients concerned.
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Please contact us to find out how the above applies in your circumstances and how you can reduce your tax liabilities and maximise your tax efficiency.
Please note that the above is for general information only and does not constitute financial or tax advice. You should not rely on this information to make or refrain from making any decisions. You should always obtain independent professional advice in respect of your own situation.
