All PAYE Payroll Products - Employment Allowance FAQ
You can now claim up to £4,000 every year against your employer Class 1 NICs liability.
The Employment Allowance is up to a maximum of £4,000 every tax year and is available from 6th April 2014 (The maximum employment allowance for 14/15 & 15/16 was £2000, this increased to £3000 for the 16/17 tax year and then to £4000 since tax year 20/21). The Employment Allowance is offset against the employer’s secondary Class 1 NICs liability during a tax year. If the total secondary Class 1 NICs liability is less than £4,000 in a tax year, then the maximum Employment Allowance which can be claimed is the total of the secondary Class 1 NICs liability in that tax year. If the total secondary Class 1 NICs liability is greater than £4,000, then the maximum Employment Allowance which can be claimed is £4,000.
If separate PAYE schemes are related in a group the group can only claim £4000 across all schemes as a total.
Domestic employers (anyone who employs someone for personal, household or domestic affairs e.g. a nanny, au pair, chauffeur, gardener, care support worker)
Public authorities (unless a charity)
Businesses whose activities are wholly or mainly of a public nature
Employers already claiming through a connected business or charity
Personal Service Companies and Managed Service Companies have restricted eligibility (not able to claim in respect of deemed payments of employment income).
There are also restrictions relating to business mergers/demergers, transfers and acquisitions
This is not an exhaustive list, please contact the HMRC to confirm your eligibility
Click the Pay drop down menu across the top toolbar and select Employment Allowance. Select Yes to turn this feature on.
IRIS Payroll Business and IRIS Bureau Payroll
Go to Company > Company Details > HMRC tab > tick the Employment Allowance box.
IRIS Payroll Professional and EARNIE
Go to Company > Alter Company options > tick the Employment Allowance box.
IRIS GP Payroll
Go to Setup Options > Tax/NI Parameters and select YES for Employment Allowance.
The value isn't claimed as such but is deducted from the month end payment to the HMRC. This will be automatically deducted on your month end reports and you pay the reduced amount to HMRC.
A separate EPS should be submitted for each year when a retrospective is claim made for the Employment Allowance two, three or four years after the tax year has ended. Where an EPS is submitted retrospectively to claim the Employment Allowance one year after the tax year has ended, the claim will continue into the current tax year as long as you don’t have a claim already in place for the current tax year. Retrospective claims to the Employment Allowance will be offset against existing or future PAYE debts unless the employer requests the payment from HMRC.
When you activate employment allowance the next EPS you send will show the status as "Yes". HMRC do not need to hear anything else about employment allowance until the status changes, as such further EPS submissions (EVEN IF RESENT FOR THE SAME PERIOD) will show the status as "None". If you then deactivate employment allowance the next EPS will show the status as "No".
The employment allowance indicator is visible on the EPS print out options as part of the submission wizard.
To change the nominated PAYE scheme on which you wish to claim the Employment Allowance you should at the start of the tax year, select you do not wish to claim the Employment Allowance for the PAYE reference for which you had previously claimed the Employment Allowance.
You should then select yes you wish to claim the Employment Allowance for the new tax year on the new PAYE reference
However, where a late claim in a tax year (for that tax year) means that there is insufficient Employer Class 1 NICs liability remaining in the tax year to use the full amount of the Employment Allowance due to you this can be offset against other current/future PAYE liabilities so that the benefit of the Employment Allowance is not lost.
Where there is a retrospective claim to the Employment Allowance after the tax year has ended then the amount of Employment Allowance up to the limit of £3,000 or the amount of Employer secondary Class 1 NICs will be offset against existing PAYE debts or current/future PAYE liabilities so that the benefit of the Employment Allowance is not lost. Alternatively, the employer can apply to HMRC for repayment of any balance due.
Further detailed guidance is available at: https://www.gov.uk/government/publications/employment-allowance-more-detailed-guidance