Employment Allowance eligibility for 2023/24
What you'll get
Employment Allowance allows eligible employers to reduce their annual National Insurance liability by up to £5,000.
You’ll pay less employers’ Class 1 National Insurance each time you run your payroll until the £5,000 has gone or the tax year ends (whichever is sooner).
You can only claim against your employers’ Class 1 National Insurance liability up to a maximum of £5,000 each tax year. You can still claim the allowance if your liability was less than £5,000 a year.
Tena Wallace, HR & Payroll Director, Visionary Accountants, St Albans said:
"The annual Employment Allowance is a very valuable government incentive for Employers. The rules are complex though and some employers don't know that they can claim it. Here at Visionary Accountants we do the claim assessments for our clients to make sure they don't miss out. It's really important that employers understand what they can and can't do to take advantage of this allowance. If you think you are eligible then advice should be sought but it's another good reason for employers to consider outsourcing their payroll services to us."
Check if you're eligible
You can claim Employment Allowance if you’re a business or charity (including community amateur sports clubs) and your employers’ Class 1 National Insurance liabilities were less than £100,000 in the previous tax year.
You can also claim if you employ a care or support worker.
You can claim Employment Allowance for the previous 4 tax years dating back to the 2018 to 2019 tax year. Some of the rules for claiming are different.
If you’re part of a group
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.
Only one company in the group can claim the allowance.
If you have more than one payroll
If you have or had more than one employer PAYE reference, the total employers’ Class 1 National Insurance liabilities for your combined payrolls must be less than £100,000 in the previous tax year
You can only claim Employment Allowance against one of the payrolls.
Check if de minimis state aid rules apply to you
If you make or sell goods or services, Employment Allowance counts as ‘de minimis state aid’. There’s a limit to how much de minimis state aid you can get.
You must:
- check that you’re within the de minimis state aid threshold
- work out how much de minimis state aid you’ve received
You must do this even if you do not make a profit.
You do not have to do this if you do not make or sell goods or services, for example you’re a charity, an amateur sports club or if you employ a care worker.
Check you’re within the de minimis state aid threshold
Employment Allowance counts towards the total de minimis state aid you’re allowed to get over a 3 year period.
You must make sure you will not exceed the de minimis state aid threshold for your sector.
De minimis state aid and the relevant thresholds are worked out in euros.
| Sector | De minimis state aid threshold over 3 years |
|---|---|
| Agriculture products sector | €20,000 |
| Fisheries and aquaculture sector | €30,000 |
| Road freight transport sector | €100,000 |
| Industrial sector / other | €200,000 |
Who cannot claim Employment Allowance
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 both of the following apply:
- you’re a company with only one employee paid above the Class 1 National Insurance secondary threshold
- the employee is also a director of the company
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
When to claim
You need to claim Employment Allowance every tax year.
You can claim at any time in the tax year, but the earlier you claim the sooner you will get the allowance.
If you claim late and do not use your Employment Allowance against your employers’ Class 1 National Insurance liabilities, you’ll have to ask HMRC to do one of the following:
- use any unclaimed allowance at the end of the year to pay any tax or National Insurance you owe (including VAT and Corporation Tax if you do not owe anything on your PAYE bill)
- give you a refund after the end of the tax year if you do not owe anything
You can see how much Employment Allowance you’ve used in your HMRC online account.
For further information, or if you would like to become a Visionary client, please contact us on (01727) 730550 or enquiries@visionaryaccountants.co.uk.