£2,000 Allowance For Employers


As of 6th April 2014, most employers can now claim the employment allowance (EA). This includes limited companies which only employs one director.  There are certain employers which are not entitled to the allowance. These include those caught by IR35, government bodies, employers of domestic workers, and some businesses supplying services to government.  In addition, only one allowance can be claimed where two businesses are controlled by the same person. This is particularly important where a company has more than one PAYE scheme.


This is a generous allowance which has been introduced to encourage employers, in particular small business owners, to take on staff. Whilst it is an incentive to recruit new staff, it is also very generous to small businesses which already employ staff.


If your business qualifies for the EA (most businesses will), the first £2,000 of your employers national insurance will not need to be paid to HMRC. This means that there are some businesses out there which will not have to pay any employers national insurance at all for the 2014/15 tax year.


For example, if you employ up to four people on minimum wage, or if you employ someone on a salary up to £22,000, this will mean that you will not have to pay any employers national insurance.


The official statistics are as follows:


–        There are up to 1.25 million businesses and charities will qualify and benefit from the employers allowance.

–        Approximately 450,000 businesses and charities will have their employers national insurance reduced to £nil following the introduction of the employers allowance.


It is very rare that the government will give you something for nothing, so it is very important that if you qualify for it, you should claim it as soon as possible.


Rather than spreading the allowance over the twelve months, the allowance is offset against the first £2,000 employer’s national insurance that is incurred. This will assist quite a lot of business with their cash flow.


All payroll software, including HMRC’s basic tools will be updated to account for the allowance. For most, there will be tailored questions when you update the software in to the new tax year. This will ensure that you do not miss out on this very generous allowance.

Mar 2, 2014