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April 4, 2014

Claim up to £2000 per year on NICs Employment Allowance!

Starting from 6 April 2014 employers can claim up to a £2000 reduction in their employer Class 1 National Insurance contributions (NICs) liability every year.

Why was NICs Employment Allowance introduced?

It sounds like too good to be true but the legislation introducing the Employment Allowance, which was part of the National Insurance Contributions Act 2014, was passed through Parliament in March 2014.

The government claims that the Employment Allowance should lead to job creation amongst small businesses as well as give them confidence boost.

For example, a small business should now be able to employ four adults or ten 18-20 year-olds full-time on national minimum wage, to be completely free from the burden of NICs. Furthermore, more than 90 per cent of the benefit will go to businesses that employ fewer than 50 members of staff.

Who is eligible to claim NICs Employment Allowance?

If you are a business, charity or Community Amateur Sports Club employing people and generating an employer Class 1 NICs liability, you could be eligible to claim the Employment Allowance on your employees’ or directors’ earnings.

However, there are exceptions for a few employers who cannot claim the Employment Allowance:

  • anyone who employs someone for personal, household or domestic affairs, e.g. a nanny, au pair, chauffeur, gardener, care support worker,
  • employers already claiming through a connected business or charity,
  • public authorities,
  • employers who carry out functions either wholly or mainly of a public nature, unless they have charitable status; e.g. NHS services, General Practitioner services or refuse collection for a local council.

For more details on eligibility go to: NICs Employment Allowance.

How to claim your NICs Employment Allowance?

The NICs Employment Allowance will be offset against payments of employer Class 1 NICs when they are due to be paid, until the full £2000 Employment Allowance is used up or the tax year ends, whichever is soonest.

The Employment Allowance will be straightforward to claim. You can do this as part of the normal payroll process through Real Time Information (RTI) within your software package or using the Basic PAYE Tools which are free to download from our website.

Your software, if it has the ability to submit an Employment Payment Summary (EPS) should require you to specify if you wish to claim the Employment Allowance and you should select the appropriate response. Alternatively, the Employment Allowance can be claimed through the 2014-15 version of the Basic PAYE Tools.

Employers exempt from filing online can claim the Employment Allowance by using the paper EPS, for which instructions are given in provided HMRC guidance.

For detailed information go to: Employment Allowance Detailed Guidance.

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