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December 2013

National Insurance - £2,000 employment allowance

You may have heard that from 6 April 2014 the Government will introduce an allowance of up to £2,000 per year for many employers to be offset against their employer Class 1 NIC liability. We have outlined a few key points/ common questions below that you might find useful.

Are there any exceptions?
Obviously!
The £2,000 cannot be used against:

• a person who is employed (wholly or partly) for purposes connected with the employer’s personal, family or household affairs. This would include nannies, gardeners and care support workers

• employer contributions deemed to arise under IR35 for personal service companies.

Can all employers claim the allowance?
There are rules to limit the employment allowance to a total of £2,000 where there are ‘connected’ employers.

What if the employer Class 1 NIC liability is less than £2,000?
The £2,000 allowance can only be used against your Class 1 employer liability, so if it is not used, it will be lost. It is not deductible against PAYE liabilities or the NIC the employer has deducted from the employee.

How is the allowance claimed?
For the majority of employers who use software that supports the Employer Payment Summary (EPS), notice should be given by selecting ‘yes’ against the employment allowance indicator on the EPS. Once notice has been given deductions for the employment allowance must be made from qualifying payments as they occur in the tax year. The employer’s payment of PAYE and NIC will be reduced each month to the extent it includes an employer Class 1 NIC liability until the £2,000 limit has been reached.

Where there are two or more PAYE schemes (for example where there are two companies which are connected), only one of the schemes can give notice and thus make deductions.

Where we are responsible for the administration of your payroll we will ensure that the allowance is claimed from April 2014.

If you have any questions or queries, please contact Kerrie Lucas, our Payroll Manager, on 02476 518555.