At CDC we thrive on saving you money and increasing your profits, and Employment Allowance is no different. It can save you at least £4,000 a year and reduce your national insurance liability. Take a look at our quick fire guide to find out more.
The Basics
Employment Allowance is a government led initiative that allows employers to reduce their annual National Insurance contributions by up to £4,000.
The allowance works by reducing your (class 1) National Insurance contribution every time you run payroll, up to the value of £4,000
Is my business eligible?
Your salon or clinic can claim Employment Allowance if your employers’ Class 1 National Insurance liabilities were less than £100,000 last tax year (NB: Your can’t claim if you’re a single director company – or in other words, you have to have more than 1 person on your payroll).
If your salon or clinic is part of a group (or connected companies) then the group’s total NI liability for last tax year needs to be less than £100,000, but only one company can claim the allowance.
How to claim:
If your salon or clinics Payroll is managed by CDC, then sit back and relax. Claiming your Employment Allowance is taken care of as part of your package (we do all the hard work, so you don’t have to).
If you manage your own Payroll, then take a look below.
How you claim depends on whether you use your own payroll software or HMRC’s Basic PAYE tools.
To claim using your own payroll software simply put ‘Yes’ in the ‘Employment Allowance indicator’ field next time you send an Employment Payment Summary (you know the good old EPS) HMRC. You can continue to do this every time you run payroll until the £4,000 threshold is reached.
If your payroll software does not have an Employment Payment Summary field, you will have to use the HMRC Basic PAYE Tools. You can find a link to it here.
Chris’ top tips to claiming Employment Allowance:
- You must select the business sectors that apply to you, even if you do not make a profit.
- Most businesses will need to select the ‘Industrial/other’ category, for example salons, clinics and most ‘service’ and ‘sales’ based businesses are found here.
- You cannot include payments you make to off-payroll workers in your calculations. These don’t count!
When do I claim?
You can claim Employment Allowance each tax year. When you claim does not really matter, but the earlier you claim the sooner you will get the money back in your hands!
If you claim late and do not use your Employment Allowance against your National Insurance liabilities, you can ask HMRC to give you a refund after the end of the tax year (but this takes ages, so make sure you get the claim in on time – why not set calendar reminders to help keep track)
You can see how much Employment Allowance you’ve used in your HMRC online account.
Saving the best news till last
If Employment Allowance is new to you and you have read this far, then we have saved the best news till last! You can claim Employment Allowance for the previous 4 tax years, dating back to the 2016 to 2017 tax year.
To claim for past years, it does not matter how much your employers’ Class 1 National Insurance liability was or how much de minimis state aid you received, these do not apply. You can find out more about claiming for previous years here. Although a top tip to remember… Employment Allowance was £3,000 each year between April 2016 and April 2020.
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