The current rules on employment allowances are undergoing big changes in April 2020.
From April 2014 employers have been entitled to £3,000 off their National Insurance bill.
But from April 2020, employers will only be eligible if their total secondary Class 1 NIC liability was under £100,000 in the previous tax year.
This is the biggest change, but there are others.
For example, in order to receive the employment allowance, you will have to claim it each year, as the relief will no longer be carried forward from one tax year to the next as it currently is.
Another change is that employment allowance is now considered as de minimis (minimal) state aid.
As employers are only allowed to receive €200,000 de minimis state aid over a rolling three year period, depending on business sector.
This means that the employer must make sure that receiving the employment allowance won’t take them over this threshold.
HMRC will also introduce new eligibility rules for the employment allowance.
The new rules include the employer supplying information on which trade sector they operate within, and the total amount of de minimis state aid they have received in the previous two years.
HMRC also will require adding together all the company’s payroll together if you have more than one, and adding the total secondary Class 1 NIC liabilities together for all connected companies.
For the vast majority of small businesses you will still be eligible, but there are still a few reasons why you might not be able to claim. These are:
- If you are the director of the company, and the only employee that is paid above the secondary threshold.
- If you employ somebody for personal work, unless they are a carer
- You are a service company working under IR35 rules
- You’re a business doing more than half your work in the public sector, unless you’re a charity
Although these changes won’t effect 99% of businesses, it’ll be up to the poor accountants to stop you falling into the one percent!