In this article, our Accountants and Payroll experts in St Albans explain how businesses can claim up to £10,500 off their NIC bill, with tailored payroll advice for local employers. But first a bit of background, that our accountants have been explaining to local businesses in Watford and St Albans, helping them navigate these important payroll updates.

Following last month's Budget our Accountants and Payroll team are looking for progress on the National Insurance Contributions (Secondary Class 1 Contributions) Bill as it makes its way to Royal Assent. Not only will this increase the National Insurance (NI) percentage (from 13.8% to 15%) in 2025/26 but it will also reduce the value of the Secondary Threshold (from £9,100 per annum to £5,000 per annum). This means more NI will be payable on more earnings.

The same Bill, however, abolishes the State Aid limitation for the Employment Allowance, and we advise you to approach your software developer and ask whether they are aware of the 2024 Bill and the removal of these restrictions. This will make it easier to claim the Allowance which can be used to offset the increased value of NI.

HMRC have written to software developers about two things:

1. Making the Employment Allowance claim through software and
2. Increased RTI reporting as a result of the reduction to the Secondary Threshold

The Employment Allowance took effect from 6 April 2014 and was introduced by sections 1 to 7 and schedule 1 of the NICs Act 2014. When it was first introduced it provided a relief of up to £2,000 a year per eligible employer against their secondary Class 1 NICs liabilities. The Employment Allowance currently provides a relief of £5,000 a year. From 6 April 2020 the Employment Allowance was restricted to employers with a secondary Class 1 NICs liabilities below £100,000 in the previous tax year.

Proposed revisions

This measure amends regulations 10 and 11 of the Social Security Contributions Regulations 2001, and makes consequential changes to reduce the Secondary Threshold for secondary Class 1 contributions from £9,100 to £5,000 a year.

This measure will increase the rate of secondary Class 1 NICs specified in section 9(2) SSCBA 1992 from 13.8% to 15% for all employers with a secondary Class 1 NICs liability. This will lead to a commensurate increase in the rates of Class 1A and 1B NICs by virtue of sections 10(5) and 10A(6) SSCBA 1992.

This measure also amends the NICs Act 2014 to increase the annual maximum amount of Employment Allowance from £5,000 to £10,500 a year. This measure also reforms the Employment Allowance eligibility condition in NICA 2014 by lifting the restriction placed on employers with secondary Class 1 NICs liabilities over £100,000 in the tax year immediately prior to the claim.

Who is Eligible?

You can claim Employment Allowance if:

• You’re a business or charity (including community amateur sports clubs)
• You employ a care or support worker

Remember you can claim Employment Allowance for the previous 4 tax years, so it is worth checking if you qualify for this valuable benefit.

You cannot claim if you’re a public body or business doing more than half your work in the public sector (such as local councils and NHS services), unless you’re a charity.

You also cannot claim if your company has just one Director and that Director is the only employee liable for secondary Class 1 National Insurance.

Employees you cannot include in your claim

Certain employees cannot be included in your claim, such as:

• Someone whose earnings are within IR35 ‘off-payroll working rules’
• Someone you employ for personal, household or domestic work (like a nanny or gardener), unless they’re a care or support worker

Action for Employers

Remember this is an allowance that you have to actively claim or it will be lost. You can also go back and claim up to 4 years previously unclaimed allowance if you qualified.

The State Aid RTI fields are still valid for tax year 2025/26 but HMRC advise that software developers should facilitate employers using the ‘State Aid does not apply’ indicator when making the claim via the Employer Payment Summary (EPS). So, there are two entries to make on the EPS:

1. Tick to claim the Allowance; and
2. Tick that State Aid does not apply

Previously, payrollers would check with employers annually about State Aid De Minimis values and ask them to declare their business sector. This will not apply in tax year from 2025/26 onwards and there is no need to ask this question anymore.

In the same communication to software developers, HMRC advised that the reduction of the Secondary Threshold will mean payroll systems will have to submit the Full Payment Submission (FPS) where earnings are above the Secondary Threshold on a per-pay-period basis. This is covered in HMRC’s Policy Paper of 13 November 2024 so it is good that HMRC have communicated directly with developers about this potentially increased administration obligation.

From tax year 2025/26, the RTI obligation to send the FPS exists where earnings are above the Secondary Threshold. Currently, the obligation exists where earnings are at or above the Lower Earnings Limit (LEL).

Maximize Your Savings: Claim Up to £10,500 Off Your National Insurance Bill Before 2025

Businesses in St Albans and Watford, take action now to claim up to £10,500 off your National Insurance (NI) bill through the Employment Allowance!

This allowance, recently updated in the 2024 Budget, can significantly reduce your secondary Class 1 NICs, which are set to increase in 2025.

To make the most of this benefit, take advice from your accountants first and ensure you approach your payroll software developer to confirm that your system can facilitate the claim under the new rules.

St Albans Payroll Expert, Tena Wallace said:

“Don’t miss out – you can claim for up to four previous tax years. Speak to Visionary Accountants in St Albans today to navigate these changes and offset the upcoming rise in NICs.”