Employment allowance not available to larger businesses from April 2020


December 3, 2018|In KRW Tax news|By Keith Witchell

The Employment Allowance covers the first £3,000 pa of Employers National Insurance, and is currently available to all but the very smallest employers.

The Employment Allowance was originally introduced in April 2014 to encourage businesses of all sizes to grow and hire staff, by covering the first £2,000 per annum of Employers National Insurance.

This allowance was increased to £3,000 per annum from April 2016 onwards.

The introduction of the Employment Allowance led to the optimum salary level for many company owner managers increasing from the NIC threshold to the personal allowance level.

To combat this, changes were made from April 2016 which meant that businesses where the Director is the only employee could no longer claim it.

However, it was announced in Budget 2018 that the Employment Allowance will be further restricted from April 2020 onwards, so that employers with an Employers NIC liability of at least £100,000 per annum will no longer be able to claim it.

To put this into context, this means that any employer which pays gross salaries in the region of £1m per annum or higher will no longer qualify for this £3,000 allowance.

For further advice on this matter please contact me.

Key Facts

  • The Employment Allowance covers the first £3,000 pa of Employers NIC
  • It is currently available to businesses of all sizes
  • Although a business with just one Director/employee can’t claim it
  • From April 2020 businesses with Employers NIC liabilities >£100,000 won’t be eligible

For further advice on this matter, please contact me.

Keith Witchell

Director