Employment Allowance restricted to SMEs Article Image

Employment Allowance restricted to SMEs

New Restrictions are set to be applied to the Employment Allowance benefit received by employers, effective from April 2020.

Employment Allowance entitles employers up to £3000 a year off their National Insurance bill. As stated by Philip Hammond in the recent budget this is to be restricted to smaller employers.

Employers can only claim Class 1 NI they have - paid up to a maximum of £3000 each tax year. Any employer that pays less than £3000 per year can still claim.

At a flat rate of £3000 per employer, it does not provide any significant incentive for larger employers.

So, what's changing?

From April 2020, the allowance will be aimed specifically at small and medium businesses with an Employers NIC bill under £100k per year.

You are eligible to claim employment allowance if you are a business or charity paying Class 1 National Insurance. If you have more than one Employer PAYE Reference number, you can only claim employment allowance against one of them.

You can't claim if you are:

  • the director and the only employee paid above the secondary threshold
  • a public body, or business doing more than half your work in the public sector - unless you are a charity
  • a service company working under IR35 rules, and your only income is the earnings of the intermediary
  • or, you employ someone for personal, household or domestic work.

For more information on how this change affects you and your business, please get in touch with one of our team.


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