If your company is eligible for Employment Allowance (EA), you can reduce your employer Class 1 national insurance (NI) contributions by up to £5,000 per year.

Not all companies are eligible. To find out who's excluded from claiming employment allowance, please refer to HMRC's guidance at: https://www.gov.uk/claim-employment-allowance. If you're unsure, you should check with HMRC. Since the tax year 2020-21, employers are required to re-check their eligibility for Employment Allowance and submit a new claim to HMRC each tax year.

The key eligibility rules which employers must check to establish if they are eligible to claim the employment allowance are:

  • An employer can only claim the Employment Allowance for the tax year if their total (secondary) Class 1 National Insurance contributions are below the threshold of £100,000 in the previous tax year

  • An employer cannot claim the allowance for deemed payments of employment income, as they are not included in the total cost of up to £100,000 for employers’ (secondary) Class 1 National Insurance contributions.

  • In the tax year before you claim, if there is more than one payroll or connected companies, the employer will need to add the total liabilities for employers’ (secondary) Class 1 National Insurance contributions for all payrolls or companies and only if the total liability is under £100,000 can one payroll or company claim the Employment Allowance

  • An employer must check that they will not exceed the de minimis state aid threshold, if applicable, as the Employment Allowance will be included as this type of aid. De minimis state aid rules apply to an employer if their business engages in providing goods or services to the market.

To let HMRC know that you're claiming Employment Allowance, you must submit an Employer Payment Summary (EPS) with the employment allowance indicator set. This EPS only contains the employment allowance indicator; it doesn't contain any payment values so you can submit it at any time.

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