Employers are given £1,000 saving thanks to Employment Allowance boost

Announced by the Chancellor in the Spring Statement last month, changes to the employment allowances worth up to £1,000 for eligible small businesses, came into effect on 6 April.

The Employment Allowance now allows eligible employers to reduce their annual National Insurance liability by up to £5,000 – up from £4,000 – helping nearly half a million businesses in the UK to cut their NIC bills.

So, what does this mean for you and your business?

Employment Allowance

Due to the increase, smaller companies will be able to reduce their employer National Insurance Contributions (NICs) liability by £5000 per year.

The allowance is available to businesses if their NICs bills were £100,000 or less in the previous tax year and where there are two or more employees on their payroll.

Who is benefiting the most?

In a bid to reduce employment costs, the change allows an additional 50,000 businesses to get out of paying NICs and the Health and Social Care Levy, according to the Government. As a result, the total number of businesses not paying NICs and the Levy will rise to 670,000.

Small and micro-businesses make up 94 per cent of those benefitting from the £1,000 increase.

However, the sectors that are most likely to feel the benefit are:

  • The wholesale and retail sector (87,000)
  • The professional, scientific and technical activities industry (63,000)
  • The construction sector (52,000).

The increased allowance will be available through payroll software where this has been updated, or through a payroll adjustment.

You can check if you are eligible to claim Employment Allowance here.

For help and advice on related matters, please contact our experienced payroll team at MT Payroll.