Do you employ staff? Are you claiming £2,000?

In April 2014 the Government introduced an allowance of up to £2,000 per year for employers to claim in offset against their employer Class 1 NIC liability.   The £2,000 allowance is sufficient to cover the liability for one employee earning approximately £22,000 or four employees paid the National Minimum Wage.  Your software should prompt you to claim, but if not you need to make sure you do not miss out.

Are there any exceptions?

There are some exceptions, where for example, the person is employed for purposes connected with the employer’s personal, family or household affairs (nannies, gardeners and care support workers), and where contributions fall under IR35 rules. Can all employers claim the allowance? No, there are rules to limit the employment allowance to a total of £2,000 where there are ‘connected’ employers. For example two companies are connected with each other if one company controls the other company.

What if the employer Class 1 NIC liability is less than £2,000?

If your annual Class 1 liability is less then £2,000 then the amount you can offset is limited to your annual amount.  Any surplus cannot deductible against PAYE liabilities or the NIC the employer has deducted from the employee.

How is the allowance claimed?

Before making any deduction, notice must be given to HMRC of the PAYE scheme from which deductions will be made.  Notice will continue to apply for that tax year and subsequent tax years.

Most employers using software supporting the Employer Payment Summary (EPS), should be prompted to give notice by selecting ‘yes’ against the employment allowance indicator on the EPS. If your payroll software does not support the EPS, then the HMRC Basic PAYE Tools package may be used.

For more information,  contact  Corey Lavender on 01246 541461