The Employment Allowance

A guide to the new Employment Allowance.

At Ling Phipp we offer professional advice to a range of businesses in the Nottingham area. Here we provide information on the new Employment Allowance.

Employers are able to claim the Employment Allowance which will reduces their employer Class 1 National Insurance contributions (NICs) by up to £3,000 per year.

The Employment Allowance is available to businesses and charities (including Community Amateur Sports Clubs) that pay employer NICs on earnings of employees or directors.

The allowance can be claimed against only one PAYE scheme, even if the business runs multiple schemes. Connected businesses such as companies under the control of the same person or persons are only entitled to one Employment Allowance between them. However, if a business controls a charity, they are not considered to be connected and the Employment Allowance can be claimed for both the business and the charity.

How to claim

Claims will normally be made using payroll software, either commercial or HM Revenue & Customs' (HMRC's) Basic PAYE Tools. The employer Class 1 NIC liability is reduced to nil until such time as the cumulative reduction reaches £3,000 in the tax year. For example if the employer's NICs are £900 each month, the Employment Allowance used will be £900 in April, £900 in May, £900 in June and £300 in July.

Once an initial claim has been made, HMRC will automatically carry it forward to the next tax year, regardless of any changes in payroll software. Therefore it is important to check at the beginning of each year that there have been no other changes in relevant circumstances.

Employers who are exempt from filing, or unable to file online, can make a claim at the beginning of the tax year using the paper Employer Payments Summary (EPS).

Excluded Employers

Not all employers can claim the Employment Allowance. Such employments include:

  • Personal, household or domestic work
  • Public authorities
  • Functions either wholly or mainly (over 50%) of a public nature (unless charities)
  • Deemed payments of employment income for personal and managed service companies.

Since April 2016, limited companies with a single director, and no other employees, have not been able to benefit from the allowance.

The information on the Ling Phipp website is for general guidance only. For more information about the Employment Allowance or any other aspects of running a business in the Nottingham area, please contact us.

Try a site search

About us

Ling Phipp was founded in 1974 and nowadays has two partners, five managers plus trainees and support staff.

We serve clients in the East Midlands and all over the UK. Our out-of-town location, with easy parking, close to the M1 junction 25 (Nottingham/Derby - A52), is very convenient.

Company details

0115 949 6838

Ling Phipp, Cliffe Hill House, 22-26 Nottingham Road, Stapleford, Nottingham NG9 8AA


© 2018 Ling Phipp. All rights reserved. We use cookies on this website, you can find more information about cookies here.

Registered to carry on audit work in the UK and Ireland and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales. Details about our audit registration can be viewed at www.auditregister.org.uk, under reference number 6424855. This is the firm number provided by the Institute of Chartered Accountants in England and Wales.