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Employment allowance changes

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Summary

This article covers the changes to Employment Allowance and how it effects you and Sage 50cloud Payroll or Sage Instant Payroll.

Resolution

What's changing?

From the 6 April 2020, HMRC made the employment allowance available to businesses and charities whose employer national insurance contributions (NICs) bill were below £100,000 in the previous tax year. Any companies that exceeded this are no longer eligible to claim the employment allowance. This means that from April 2020 larger employers need to ensure that the Eligible for Employment Allowance check box within Company > Settings isn't selected.

Employment allowance is now considered a type of State Aid. This is because it's essentially placing some businesses in an advantageous position over others which could potentially distort competition and trade within the European Union (EU).


What does this mean?

The change effectively withdraws the employment allowance for medium to large sized companies, with approximately 100,000 employers affected by the change. However, over 99% of micro-businesses and 93% of small businesses will still be eligible for the allowance.

Regardless of the size of your company, you can't claim the employment allowance if:

  • You're the director and the only employee that's paid above the secondary threshold.
  • You employ someone for personal, household or domestic work unless they're a care or support worker.
  • You're a public body or business doing more than half of your work in the public sector unless you're a charity.
  • If you're a service company and supply services where some of the income falls under the IR35 rules, whilst other income is outside the scope of these rules then you may be able to claim some employment allowance. Professional advice should be sought on your specific circumstances.

What do I need to do?

A the beginning of every tax year, you need to apply to claim the employment allowance within Company > Settings. This submits an employer payment summary to HMRC.

To find out how to apply for and claim the employment allowance, check our employment allowance guide >

TIP: If your claim is rejected, you receive an automated message from HMRC within five working days. If you haven't heard from HMRC within five working days, you can claim the employment allowance.

 


 

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