What is the Employment Allowance?

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.