The employment allowance means that many employers don’t need to pay the first £5,000 (2023/24) of employers National Insurance Contributions (NIC) due. Note that employees NIC is still fully payable to HMRC. You claim the employment allowance by submitting an EPS payroll report to HMRC which indicates that you are claiming the allowance. You can see how much you have already claimed this tax year by viewing the payroll report that shows how much is payable to HMRC every month. This report is called a P32 or EPR and the allowance or employment allowance column shows how much has been claimed.
If the only employee that is paid more than the secondary NIC threshold (£9,100pa) is a sole director, it can’t be claimed. If the employer (or group of connected employers) pays more than £100,000 of employers NIC in a tax year, it can’t be claimed. Only one employer in a connected groups of employers can claim the employment allowance. Some businesses may not be able to claim it if they have received other grants from the UK/EU. See here for more details.
HMRC is sending letters to most employers about Employment Allowance. Receiving a letter does not indicate whether you can or can’t claim it. For our payroll clients, we have already claimed Employment Allowance for you if you are eligible.
Change in Pay
PAYE and NIC deductions are based on a percentage of pay, so if your pay changes, these deductions are likely to change in the same direction. A change in pay might also put you into a different tax band so the rate of PAYE/NIC may have changed.
Change in PAYE Tax Code
The PAYE deductions are based on your PAYE Tax Code. The standard tax code is 1257L which gives you an annual tax-free allowance of £12,570. In other words PAYE is not deducted from the first £1,047.50 of pay per month. Generally, if your PAYE code increases, you get more of a tax-free allowance so the PAYE deductions decrease, and vice versa. The PAYE tax code is determined from the employee’s joining details, such as the starter checklist and P45, then can only be changed by HMRC.
Director’s NIC
Directors usually pay NIC on an annual basis. So they pay no NIC while their year to date pay is below the NIC thresholds. When their year to date pay goes over the thresholds they pay the full rate of NIC on the excess. So directors on a small salary, typically around £10k per annum, will notice that they pay no NIC in April to December, then start paying NIC in January to March. There are two starting thresholds for NIC – £9,100 for Employers NIC and £12,570 for Employees NIC (2023/24).
First, you need to create an HMRC account, if you don’t already have one.
https://www.access.service.gov.uk/registration/email
Then you need to follow the instructions below. The procedure may vary depending on your account and any recent HMRC updates.
1. Log into your HMRC account
2. Click on Manage account
3. Click on Get online access to a tax
4. Select the tax service you want to add.
5. Follow the HMRC instructions to add each tax service you need
FAQsWith difficulty! Try first thing in the morning (from 8am). Sometimes they don’t take calls on Fridays. Here are the contact details for the main taxes:
Income tax (including employees)
Self assessment (personal tax returns)
FAQsWe email you a link to the instructions on how to pay HMRC every time a payment is due. Look for emails from [email protected] with ‘Submitted’ in the subject. The email should also tell you how much we expect you to pay but check the amount is still up to date. It will also either give you the payment reference or explain where to find it.
Here are links to the instructions on how to pay HMRC for each of the main taxes:
FAQsSo that we can see some of your HMRC account, you need to authorise us as your tax agent. You need to do this for each tax service. If we have sufficient details we can ask HMRC to send you an authorisation code. HMRC will post the code to the address HMRC have for that service. Let us know what that code is.
Alternatively, you can authorise us on your HMRC online account by following the instructions below. The procedure may vary depending on your account and any recent HMRC updates.
1 Log into your HMRC account
2. Click on Manage account
3. Click on Add, view or change tax agents
4. Select the service you’d like to change
5. Select Add an agent or Manage agents
6. Remove any old agents and add us using code: CloudBookAcc-GJ11GU1XV5JG. Click on Continue
7. Click on Add Agent
