Changes to Employment Allowance

Significant changes to Employment Allowance that were first announced by the Chancellor in his 2015 Budget came into effect at the start of the new financial year on 6 April.

While the maximum reduction to employers’ Class 1 National Insurance Contributions has increased from £2,000 a year to £3,000 a year, directors who are the only paid employee in their company are no longer able to claim. Previously, where directors in this position were paying themselves more than £8,112 per year (£156) they were able to claim Employment Allowance.

In effect, the change could increase the National Insurance contributions of affected directors by as much as £2,000 when compared to last year. It remains to be seen how many directors this change will affect.

The government introduced Employment Allowance in April 2014 to help businesses and charities grow by reducing the cost of taking on new employees. At the time it was also intended to partly offset the costs of an increase in the rate of the National Minimum Wage.

Since Employment Allowance was introduced, over a million employers have benefited. Businesses and charities that were eligible, but did not claim, can still receive Employment Allowance dating back to the 2014/15 financial year.

Link: Employment Allowance