Are you aware of the employment allowance changes? Most employers have been entitled to a deduction from their Class 1 NI bill currently worth £3,000 annually. Some businesses will lose their entitlement to the employment allowance (EA).There will also be general changes to the way that the EA works.
Will your business be affected, and if so, how?
The new EA conditions from 6 April 2020 are:
- if your liability to employers’ Class 1 NI in the previous tax year exceeded £100,000 you will lose entitlement to the allowance
- you won’t automatically qualify for the EA. You must claim it each tax year. A declaration confirming you’re eligibility will have to be submitted
- you must reassess your eligibility to the allowance if you become connected with another employer. An example of this would be sharing resources such as premises or staff
- the EA will be state aid. This counts towards the maximum €200,000 aid you can receive in a rolling three-year period. You must have room to accommodate the whole £3,000 EA within the state aid limit or lose your entitlement.
Although over 93% of small businesses will still be eligible for the employment allowance there are still some restrictions.
You can’t claim the employment allowance if:
- being a director and only employee you are paid above the Secondary Threshold
- you employ someone for personal, household or domestic work (like a nanny or gardener) – unless they’re a care or support worker
- as a public body or business you are doing more than half your work in the public sector (such as local councils and NHS services) – unless you’re a charity
- you are a service company working under ‘IR35 rules’ and your only income is the earnings of the intermediary (such as your personal service company, limited company or partnership).
Remember, making an annual claim will be the biggest employment allowance change facing most employers, so don’t get caught out.