Did you know that as an employer you could get up to £3000 a year off your National Insurance bill? In previous years the employment allowance was £2000 but in 2016-17 this went up to £3000 as an incentive for companies to take on more staff.
Many employers don't take full advantage of the employment allowance because they don't fully understand how this works. We are going to outline some key areas that you should take into consideration.
Are you eligible?
First, you need to make sure that you are eligible. All businesses and charities can claim employers allowance if they are paying the employer's Class 1 National Insurance.
However, from 6 April 2016, the rules changed for limited companies where the director is the only employee. If the director is paid more than the Secondary Threshold for Class 1 National Insurance they will not be eligible to claim employers allowance. The Secondary Threshold for 2016-17 has been set at £156 a week.
How much can you claim?
Each employer has a total allowance of £3000 available each year. You can make a claim against Class 1 National Insurance you have paid each time you run your payroll. Once you have reached £3000, then you have to wait until the following year to benefit from the allowance again. If you get to the end of the tax year before you have used all your employer's allowance, you can't carry this over. The allowance starts from scratch in the new tax year.
How do you claim?
You make a claim once through your payroll system. If you use a payroll provider, they will sort this out for you. If you manage your payroll and use the HMRC Basic PAYE Tool then, you need to make sure you register online. If you do submit a claim late in the year, there may be an opportunity to offset your allowance against any tax or National Insurance you owe or the HMRC may be able to give you a refund.
If you are unsure about how to claim for employers allowance, or you want information about outsourcing your payroll give us a call on 01623 490 120 or email