If an individual, limited company or a charity pays Class 1 National Insurance for its employees, it may be entitled to the employment allowance. This entitles the employer up to £3,000 off its National Insurance bill within each tax year. The allowance is not available to a limited company which has only their director on their payroll, or has several employees but only the director earns a salary of over £156 which is the Secondary Threshold for Class 1 National Insurance. The deciding factor for the allowance is whether there are additional employees earning over the secondary threshold through the company payroll. In the event of two employer PAYE references, only one can have the employment allowance claimed against its PAYE taxes.Ensuring that the allowance is claimed for correctly is important; HMRC can impose penalties if PAYE tax is paid late due to a miscalculation. If there is any doubt of a company’s status with regards to claiming the employment allowance it is ideal to seek advice either from HMRC or an accountant.If a company has additional employees earning above the secondary threshold part way through the year before a change which means only the director is the one earning over the secondary threshold, the allowance can still be claimed for the whole of the tax year and then stopped when the new tax year begins. This can exclude businesses who take on seasonal employees where one or more employee is earning above the secondary threshold.
Get in touch and see how we can help you