How the employment allowance benefits small businesses

April 6th, 2020 | Posted in Business Advisory, Tax Planning

The ‘Employment Allowance’ can save employers up to £4,000 of employer’s class 1 national insurance contributions per year on employees’ earnings.  It is important to point out here that employer’s class 1 national insurance is a direct cost to employers on top of an employee’s gross salary and this is therefore a very valuable tax break for small businesses.


The allowance is available to businesses or charities of all sizes with one or more employees.  There are specific rules for groups of companies and charities under common control as well as for employers running more than one PAYE scheme so that the employment allowance is only available once.  Certain employers such as carers, nannies and single-director companies cannot claim the allowance.

The allowance can be offset against the employer’s national insurance liability each week or month until the full £4,000 is used up.  This could mean that some employer’s will benefit from the full £4,000 allowance in the first month of the tax year while other smaller employers will benefit gradually throughout the year.

The allowance cannot be used against any other tax and PAYE liabilities such as employee’s national insurance or income tax.

Claiming the allowance is straightforward and can be done on either HMRC’s Basic PAYE Tools or via payroll software.

VAT deferred between 20 March & 30 June 2020 can either be paid in full by 31 March 2021 OR by up to 11 smaller interest-free instalments made by the end of March 2022. More information released by HMRC here

The claims process for the third self-employment income support scheme (SEISS) grant is now open. However, potential claimants need to be aware of the eligibility criteria which have been significantly tightened compared to the first and second grants.

Following compliance checks into CJRS and SEISS grants, HMRC are now beginning checks into Eat Out to Help Out claims made

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