Below is a list of the most common questions about Employment Allowance.

Does Employment Allowance still count as State Aid?

No, this changed from 6 April 2025. The allowance is no longer 'de minimis state aid'.

This means you don't need to select a state aid sector anymore, so we removed these options from Sage 50 Payroll v32.

How do I claim Employment Allowance?

Companies need to apply for Employment Allowance. Sage 50 Payroll includes options to allow you to make this submission electronically.

HMRC then validate whether the claim is valid.

Am I eligible for Employment Allowance?

Go to Gov.UK to check if your business is eligible.

Do I submit Employment Allowance values each period to HMRC from my software?

No, the only submission from Sage 50 Payroll is the Employer Payment Summary when you first apply.

Once HMRC approves your claim, their systems automatically calculate your Employment Allowance based on the values in your Full Payment Submissions. 

Do I have to wait for HMRC confirmation to tick the Eligible box after applying?

If you’re confident you meet all the requirements for Employment Allowance, then you don't need to wait and can tick the box immediately.

HMRC no longer sends confirmation that your application was successful. If you apply and don't hear from HMRC, your application was successful.

HMRC will inform you in the IR Secure Mailbox within five working days if your application was unsuccessful.

Contact HMRC directly if you have any concerns about your application.

How do I account for Employment Allowance if I started claiming mid-tax year

Once you enable Employment Allowance, your software calculates it when you run the P32. This means your software didn't calculate any allowance for the tax months before you enabled it.

To calculate it for the whole tax year, re-run the P32 report for each tax month, beginning from month one. 

Run the P32 for one month at a time, not a range of months. This ensures that your software calculates and logs any changes for each month individually.

I enabled Employment Allowance but the application then came back as unsuccessful

Go to Company then Settings and clear the Eligible for Employment Allowance checkbox. Your software prompts you to send an EPS to HMRC to confirm you're not claiming, select Yes and complete the submission wizard.

If you paid any tax month's liability with Employment Allowance deducted, you underpaid HMRC in that period.

Re-run the P32 after you disable the allowance, the total due is higher without any allowance deducted. Calculate how much you owe HMRC and arrange this payment.

I’ve moved to Sage 50 Payroll part way through the tax year, how do I handle Employment Allowance?

Your software doesn't include manually entered Employment Allowance year to date values on the P32.

For more information on this, visit the P32 report - Manually entered Employment allowance or Apprenticeship levy not included article.

Due to this, you need to either:

• Calculate the values manually outside of the software and manually amend your P32, or
• Rollback and reprocess the payroll from the start of the tax year and the software calculates Employment Allowance automatically

Does nominal link post Employment Allowance into Sage 50 Accounts?

Your software doesn't post Employment Allowance values if you use the Nominal Link option.

To reconcile your accounts, create a manual journal to reduce the total NI on your balance sheet nominal code.

For help with doing this, follow our post the employment allowance value in your accounts article.

Can I claim the allowance in each company within my group?

If you're eligible for Employment Allowance and your business has multiple PAYE schemes, you can only claim for one of them.

You need to claim for the PAYE scheme with the most allowance. To do this, pick a scheme where you think your employer's Class 1 NI liability will meet the annual Employment Allowance amount.

This is currently £5000. Then advise HMRC which scheme you're claiming Employment Allowance for.

Are employees under IR35 part of Employment Allowance calculations?

If an employee's status as 'Deemed', your software excludes them from your Employment Allowance calculations under off-payroll working rules (IR35).

If you employ someone for personal, household, or domestic work, use a specific PAYE scheme for this, without Employment Allowance enabled.

To find out more about exclusions, visit Gov.UK.

Is this the same as Small Employers' Relief?

No, this benefit is different to Small Employers' Relief.

Visit our what is Small Employers' Relief article if you'd like to find out more.