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National Insurance Employment Allowance

This allowance will reduce employers’ Class 1 National Insurance contributions (NICs) by up to £2,000 every tax year from 2014/15. The allowance is set against the employer’s entire NIC liability each week or month until the maximum £2,000 entitlement is used up. It cannot be set against Class 1A or Class 1B employer NIC.

Who can claim?

The employment allowance can be claimed by any business or charity (including community amateur sports clubs) that pays NICs on employees’ or directors’ earnings. If the employer is a company belonging to a group of companies, or a charity, which is part of a charities structure, only one company or charity can claim the allowance.

An employer can claim the employment allowance against only one PAYE scheme, even if the business runs multiple schemes.

Not all businesses or employers can claim the employment allowance – there is a list of excluded employers, including;

  1. Public authorities
  2. Businesses (other than a charities) carrying out functions of a public nature, NHS services, council services, prison services.
  3. Employers of individuals for personal, household or domestic work, such as a nanny, au pair, chauffeur or gardener or care support worker.

Personal and managed service companies who pay contract fees instead of a wage or salary may not be able to claim the employment allowance, as it cannot be used in respect of deemed payments of employment income. Service companies can only claim the allowance if they pay earnings and have an employer Class 1 NICs liability on these earnings. They pay earnings and have an employer Class 1 NICs liability on these earnings.