Overview of changes to the Employment Allowance

For those who haven’t already heard, from April 2020 there will be some changes to the Employment Allowance which is good news for all smaller businesses but not so good if you’re not!

As of April 2020, only employers who have secondary Class 1 National Insurance Contributions (NICs) liability below £100,000 will be able to claim Employment Allowance. This is obviously a change from April 2016 when the current Employment Allowance was set and most businesses received £3,000 per year for their secondary Class 1 NICs liabilities.

The new Employment Allowance will be implemented under ‘de minimis state aid’ which is an approved EU state aid that allows aid of under €200,000 over three consecutive fiscal years.  HMRC advises that “to claim the Employment Allowance, employers must have space for the full Employment Allowance (currently £3,000) within their relevant de minimis state aid threshold.”

The HMRC open consultation states that “employers with a Class 1 secondary NIC liability of £100,000 or more in the preceding tax year will not be able to claim the Employment Allowance benefit.”

It’s also worth noting that there will be a change in the administration process too. Employers will now have to claim the allowance moving forward to receive this benefit.  Up until now it has just been carried forward into the next tax year.

This is an open consultation from HMRC inviting comments and views on the draft regulations which closes on 20 August 2019. You can view the draft legislation and respond here.

Accountants in my area

If you need help navigating this forthcoming change in legislation, call our team of accountants today on 01883 717077 or email info@mckenziesgroup.com for expert advice.

Get in touch if you’d like to discuss our compliance, outsourcing and advisory accountancy services including annual accounts, partnership tax, employment tax, self-employment tax, bookkeeping and payroll services.