The Employment Allowance is an annual amount that is currently available to all businesses and charities (with some exclusions) to offset against their Class 1 secondary NICs bill. It remains at £3,000 for 2019-20.
It was introduced in April 2014 to support employers to grow and hire new staff. However, it is a flat rate regardless of the size of the employer and is therefore less likely to be an incentive for larger employers. Therefore, the government has decided to target this allowance at smaller businesses.
From April 2020 an employer will only be entitled to claim Employment Allowance if that employer had an Employer NIC bill of less than £100,000 in the previous tax year.
The change effectively withdraws Employment Allowance for medium to large sized companies, with many employers with a gross annual wage bill of more than c.£850k affected by the change.
Given the low value of Employment Allowance, the change targets the allowance at employers who are likely to consider the relief that it gives, material.
Over 99% of micro-businesses and 93% of small businesses will still be eligible for the Allowance.
However regardless of size of company, you can’t claim the employment allowance if:
• you’re the director and the only employee paid above the Secondary Threshold • you employ someone for personal, household or domestic work (like a nanny or gardener) - unless they’re a care or support worker • 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’re a service company working under ‘IR35 rules’ and your only income is the earnings of the intermediary (such as your personal service company, limited company or partnership).
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NICs guidance updated for 2019-20 22 February 2019
Various National Insurance guidance has been updated to reflect changes for the 2019-20 tax year; namely the CWG2, CA41, CA44, CA42 and the CA40.
CWG2: further guide to PAYE and National Insurance contributions Find out about detailed Pay As You Earn (PAYE) and National Insurance contributions for current and previous years if you’re an employer. CA41: National Insurance contributions tables B and C Use this booklet to manually calculate contributions for employees who must pay National Insurance. Current and previous tax years. CA44: National Insurance for company directors Find information about paying National Insurance contributions (NICs) for company directors in current and previous tax years. CA42: Foreign-going mariners and deep-sea fishermen Use this booklet to manually calculate contributions for employees who must pay National Insurance for current and previous tax years.
CA40: Employees allowed to pay their own National Insurance Use form CA40 if HMRC has told you, as an employee, to deduct National Insurance contributions from wages.
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The Chartered Institute of Payroll Professionals
Payroll: need to know
cipp.org.uk
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