National Insurance

Friday May 2014

Cut your NI bill by £2,000 with the new HMRC employment allowance (EA).

Most employers and companies can claim the EA even where their only employee is a director. But there are exclusions. If your business is caught by IR35, i.e. it’s a so‐called personal service company, you can’t claim the EA in respect of deemed PAYE income. Other excluded employers are government bodies, some businesses which supply services to the NHS and government and employers of domestic workers.

Note that you can’t double up on the EA by paying wages through two businesses that are controlled by the same person or persons. Only one of the companies will be entitled to claim the allowance.

After you have sent your RTI full payment submission for payroll runs after 5 April you can file an employer payment summary (EPS) specifically to claim the EA. Most payroll software, including HMRC’s Basic PAYE Tools, will be changed to show a “yes/no” indicator asking if you want to, i.e. are entitled to, claim the allowance. If you choose “yes”, an EPS will be generated to submit to HMRC.

Your payroll software should work out the maximum EA you can claim for the month. The good, and somewhat surprising, news is that the allowance won’t be spread over the tax year but can be knocked off your earliest employers’ NI bill. For example, say your employers’ Class 1 NI bill is £800 for April, your EA will be used to reduce this to nil. The balance of the EA, in this example £1,200 (£2,000 ‐ £800) will be used against your NI for May and, if anything is left, against your June bill, etc.

HMRC’s guide covers which types of employer can claim the EA but please contact us if you need more advice.

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