National Insurance exemption

Employers, or more specifically, the persons in charge of processing their payroll, are hopefully checking the box to claim the National Insurance Employment Allowance (EA)?

The EA reduces the employers’ (secondary) Class 1 NIC bill. If your employers’ NIC charge is normally more than £3,000, then this is as good as £3,000 additional cash in the bank. If your employers’ NIC bill is less than £3,000, then the EA will wipe out this employment cost for your business.

So far, so good. Why is there always a but…?

You can’t claim this allowance if:

  • You are the director and the only paid employee in your company.
  • You employ someone for personal, household or domestic work (like a nanny or gardener) – unless they’re a care or support worker.
  • You are 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 are 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)

If you or your company have more than one registered payroll reference with HMRC, you can only claim the EA against one of them.

The first bullet point will no doubt be the most applicable exclusion, the owner managers of one-person companies, but if you can claim, a simple tick in the correct box of your payroll software should do the trick – your NIC payments should be automatically reduced until the £3,000 EA has been fully claimed.

Please note, the EA is only available to set off against employers’ Class 1 NIC, you cannot use this allowance to reduce employees’ contributions.

Latest Blog
17
Feb

Small business stress and government response

A UK parliamentary report has been widely covered this week warning that small firms ...

Read More
12
Feb

Waiting until the year end to plan tax often costs more than it saves

Many business owners and individuals only think about tax when a deadline approaches ...

Read More
10
Feb

Reviewing pension contributions before 5 April

For many people, pensions are seen as something to think about later in life rather t...

Read More
03
Feb

Construction Industry Scheme – tackling fraud

Tackling fraud in the Construction Industry Scheme (CIS) was one of the measures addr...

Read More