It’s now been three months since the introduction of the Employment Allowance, which allows businesses, charities and community amateur sports clubs to save up to £2,000 on National Insurance Contributions (NIC) per year. Here at the ICAEW, we are urging all of those who are eligible to take advantage of the new allowance, especially small businesses.
SMEs stand to make significant savings now the Employment Allowance has been rolled out fully. For example, if a small business hired ten individuals between the age of 18 and 20, four adults on the minimum wage or a single adult on £22,000 per annum, it would be able to do so without having to pay any employer’s NIC. As a result, it is anticipated that the implementation of the Employment Allowance shall relieve 450,000 businesses or charities of their requirement to pay NIC where they may have had to previously.
The system is easy to implement and the process of claiming is simple for all organisations. For instance, merely ticking the ‘yes’ box through either payroll software or HMRC’s Basic PAYE Tools will qualify you to take away the £2,000 from your monthly or weekly contributions. This continues until the full allowance for 2014/15 tax year has been used up, at which point the Employment Allowance then continues to roll on automatically on an annual basis.
Although the introduction of the new Employment Allowance should save small businesses money, it does not allow multiple firms that are a part of the same large group or structure to claim the allowance. Only one firm within each structure can claim it and the same applies to firms that run multiple PAYE schemes, as they can only claim against one of their schemes.
However, should it transpire that not all of the £2,000 allowance has been claimed, the company can then claim the remainder against a secondary PAYE scheme.
To check if this is the case, HMRC’s online portal allows you to see how much of the allowance has been claimed at any time, by going to the ‘View PAYE and liabilities’ section.
While the Employment Allowance is open to most businesses, there are some exceptions. These include employing someone for personal, household or domestic work, such as a nanny, au pair, chauffeur, gardener or care support worker.
The allowance should, in theory, be easy for businesses to implement, as the entire allowance can be claimed up front as opposed to being presented as a monthly reduction. This should particularly make it easier for smaller businesses to take the new allowance on board and help encourage them to recruit more staff. But you must register in order to be eligible, so ensuring that both businesses and charities are aware of this is vital.
HMRC has produced a six-page guide giving detailed information about exactly which businesses and charities may or may not apply for the allowance. It can be found on the HMRC website.
At the end of the day, every little helps when you’re a start-up, so you can ill-afford not to be taking advantage of support like this.