Employment Allowance – further restrictions ahead

Date posted: 20th Aug 2019

The employment allowance, which was introduced in 2014 to support employers increasing their head count is set to be restricted from April 2020.


At the moment, an employer can potentially claim a deduction of £3,000 against the employer’s national insurance bill. There are already numerous restrictions in place in relation to the allowance, which limit the amount claimable. For example, where a director is the sole employee of the limited company, the company will not be able to claim employment allowance. In addition, a group of companies or companies related by ownership, will only be entitled to one allowance between them. Further details of other restrictions is available on the government website.


However, from April 2020, the Government are proposing that the employment allowance is restricted to smaller businesses, who had a national insurance bill below £100,000, in the previous tax year. This could therefore impact upon those businesses with a significant payroll bill. Our payroll team are monitoring the position for our clients and will be providing advice in due course.


In addition, it is important to also note that the provision of the employment allowance will be regarded as de minimis state aid from 2020. This could be problematic as, if the employer has received other de minimis state aid (such as grants or tax breaks) then they may not be able to claim the employment allowance due to the maximum limits on the amount of de minimis state aid that can be claimed in a three year period.


If you have any queries regarding the employment allowance or indeed any aspect of payroll, please do give our payroll team a call.

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