Employers allowance for National Insurance – could your business be missing out on a potential £14k?

Employers allowance allows eligible employers to be able to reduce their annual employer’s National Insurance liability by up to £4k in previous years but has since been raised to £5k per year. You can even backdate your allowance if you haven’t claimed before.

The allowance

If you’re claiming for the first time you can backdate the claim for four years, however, you must then continue to claim on a yearly basis.

The earlier you put your claim in the sooner you will be able to start reducing your national insurance payments. From the moment the claim is accepted you’ll pay less employers class 1 national insurance every time payroll is run until the £5,000 has gone or your year end ends.

The £5,000 allowance applies to your business, not to individual employees. So, for example, if your Employer’s National Insurance bill is £5,500 in total for the tax year, you’ll only need to pay the £500 excess.

The allowance is classed as de minimis state aid if you make or sell goods and services. There’s a limit to how much of this you can get.

Who’s eligible?

  • A registered employer – including, limited companies, sole traders, partnerships and charities as long as their class 1 national insurance liabilities were less than £100,000 in the previous year.
  • If you’re part of a group of charities or companies (also known as connected companies), the total employers’ Class 1 National Insurance liabilities for the group must be less than £100,000 and only one company in the group can claim the allowance

What doesn’t qualify?

  • If you’re a company with only one employee paid above the class 1 National insurance secondary threshold or if the employee is also a director of the business, then unfortunately you won’t be able to claim.
  • You’re also unable to claim if you’re a public body or business doing more than half your work in the public sector for example; if you work within a local council or the NHS although this rule doesn’t apply if you’re a charity.

There are also certain employees that you can’t be included in your claim such as.

  • Someone you employ for domestic, household, or personal services (like a cleaner or gardener)

  • Someone whose earnings are within the IR35 ‘off-payroll working rules’

What happens if I claim late for this year?

If you claim late and do not use your Employment Allowance against your employers Class 1 National Insurance liabilities, you can request it to be offset against any outstanding tax, National Insurance, VAT or Corporation Tax.

If you have no outstanding liabilities, you can then receive a refund.

Backdating a claim

We mentioned earlier that you can backdate your allowance for four years which currently dates to the 2018/19 tax year.

For the tax years 2018 – 2019 and 2019 – 2020 it doesn’t matter how much your employer’s class 1 national insurance liability was or how much de minimis state aid you received.

So, if you have not yet claimed your employers allowance you could potentially be receiving a refund of up to £14,000.

For more information feel free to contact our head office on 01303 850992