Am I entitled to claim Employment Allowance?

If you are eligible for the Employment Allowance, you will be able to reduce your Employers National Insurance liability by up to £5,000.

The rules for the Employment Allowance (EA) changed from the 2020/21 tax year.

You now need to make extra checks to find out if you are eligible to claim EA. This includes checking de minimis state aid.

A new claim needs to be submitted each tax year through your Employer Payment Summary (EPS) as claims will not automatically renew each year.

To be eligible you must fulfil all the below criteria:

• Either work in the private sector or perform less than 50% of your work in or for the public sector, in terms of time or turnover. This restriction does not apply to those supplying IT services for a government department or local council.
• Pay more than one employee.

If only directors are paid they must both have a gross salary above the annual secondary threshold.  If a directorship began after the start of the tax year this is pro-rated.

If a director and an employee, (who is not a director), are being paid, the non director needs to be paid above the secondary threshold, irrespective of the amount the director is paid.  The employee does not have to be paid above the secondary threshold for the entire year to qualify. If your company has employees paid above the secondary threshold, but circumstances change during the tax year and the director becomes the only employee paid above the secondary threshold, you can still claim the Employment Allowance for the tax year, but you will not be able to continue the claim into the next tax year.

• Your total qualifying employers (secondary) Class 1 NICs liability in the previous tax year must be less than £100,000.
• You must not exceed the de minimis state aid threshold. This means it will contribute to the total aid you are allowed to receive under the relevant de minimis state aid cap in the relevant 3 year period.

If you are unsure, at this stage, whether you will meet the eligibility requirements, you can always claim later, either when you are assured of your eligibility, or at the end of the tax year.

Should you have any doubt at all regarding your eligibility, we would advise that you speak to HMRC directly on 0300 200 3200.