The Employment Allowance provides small businesses with financial relief by offering a rebate on the employer’s National Insurance contributions. This measure aims to support small business owners and encourage job creation.

The Employment Allowance, introduced by the government in 2014, provides small businesses with relief on staffing costs. It can help boost your business and aid growth by reducing your National Insurance liability by up to £5,000 per tax year. The allowance is per business and not per employee and can only be claimed against Class 1 National Insurance if it is up to £5,000. You are eligible to claim if your employers’ Class 1 National Insurance liabilities were less than £100,000 in the previous tax year and you can claim for up to four previous years. To claim, you simply need to reduce your monthly PAYE/NICs payment by employer class 1 NI until all £5,000 allowance has been used. However, eligibility criteria may change, and you must reapply every tax year. Other government schemes such as Small Employers’ Relief may also be available, and you should take de minimis state aid into account as Employment Allowance counts towards it for some businesses. To apply, you can use your own payroll software or HMRC’s Basic PAYE tools, and eligibility depends on your employees’ NICs. The rates of class 1 NICs are calculated differently for employees and employers, and there are more than 12 different NI categories. You can claim at any point in the tax year, and if you stop being eligible, select ‘No’ in the ‘Employment Allowance indicator’ field in your next EPS. HMRC won’t send you a confirmation letter for your allowance, but you can find out how much Employment Allowance you’ve used in your HMRC online account.