The Employment Allowance (EA) provides many businesses and charities, including schools with a reduction in their employer National Insurance contributions (NIC) bill since its inception in 2014/15. The rules have broadly remained the same until now.
The following changes have been implemented from April 2020:
- Employers will only be entitled to claim EA if they had an employer NICs bill of less than £100,000 in the previous tax year
- There will be no automatic qualification for EA based on previous year’s eligibility, you must claim it each tax year
- The amount of the EA has increased to £4,000
- Employers must be able accommodate the £4,000 EA within state aid limits.
Under EU regulations, EA is considered a form of state aid, so any employer in receipt of state aid for other reasons must take this into account before claiming EA.
Note that the £100,000 employer NICs bill includes all NICs paid under multiple PAYE schemes where a school has more than one scheme and also where a school is connected to other schools and charities etc.
How to Claim
To claim through your payroll software put ‘Yes’ in the ‘Employment Allowance indicator’ field next time you send an Employment Payment Summary (EPS) to HMRC.
If your payroll software does not have an Employment Payment Summary field, you can use HMRC’s Basic PAYE Tools instead.
If you make or sell goods or services, even if you do not make a profit, select all of the de minimis state aid business sectors that apply to you. Otherwise choose ‘State aid rules do not apply’.
If you have any questions concerning this, please speak to your usual MKS contact.