Employment Allowance


From the 6th of April 2014 employers can reduce the amount of National Insurance (class 1) that they pay for their employees by a maximum of £2,000 per year.

The Employment Allowance can be claimed  if you are a business or charity that pays employer Class 1 National Insurance contributions on your employees’ or directors’ earnings.

It is estimated that around 1.25 million businesses will benefit from the Employment Allowance with around half a million that will not have to pay National Insurance contributions at all.

You can claim the Employment Allowance through your own payroll software or use HM Revenue and Customs’ Basic PAYE Tools.

According to HMRC, they will : “automatically carry your claim forward each tax year, and you will be able to see how much of the Employment Allowance you have used in ‘View PAYE Liabilities and Payments’ in HMRCs Online Service.”

There are some businesses that can not claim the Employment Allowance, for example :

  • “employ someone for personal, household or domestic work, such as a nanny, au pair, chauffeur, gardener, care support worker
  • already claim the allowance through a connected company or charity
  • are a public authority, this includes; local, district, town and parish councils
  • carry out functions either wholly or mainly of a public nature”

For more information please visit the HMRC website where there is detailed guidance or contact us to see if we can help.