Employment allowance changes from 6 April 2020
The maximum Employment Allowance (EA) will increase from £3,000 to £4,000.
Employers will only be eligible for EA if their total qualifying employers’ secondary Class 1 NIC liability in the tax year ending 5 April 2020 is under £100,000.
For connected companies, if the total employers secondary Class 1 NICs liabilities for all companies in the group is £100,000 or more, none of the connected companies will be eligible to claim EA.
EA will operate as de minimis state aid. This means it will contribute to the total aid you are allowed to get under the relevant de minimis state aid cap in the relevant 3 year period. De minimis state aid rules apply if your business engages in economic activity, providing goods or services to the market.
You should have been told in writing if aid you have received was de minimis state aid and how much you got. You’ll need to make sure that you have space under your business sector ceiling to get the full amount of EA available. If companies are connected, you’ll need to add the totals for each of the companies together. For most businesses the limit is set at €200,000 but different limits apply for businesses in the agricultural, fisheries and transport sector.
What will this mean?
Approximately 100,000 employers will be affected by the eligibility changes, however more than 99% of micro-businesses, and 93% of small businesses will still be eligible for the allowance and will benefit from the increase.
Regardless of the size of your company, you can’t claim the employment allowance if:
- You’re the director and the only employee that’s paid above the secondary threshold.
- You employ someone for personal, household or domestic work, unless they’re a care or support worker.
- You’re a public body or business doing more than half of your work in the public sector, unless you’re a charity.
- You’re a service company working under IR35 rules and your only income is the earnings of the intermediary.
Do you need to do anything?
You will need to make a new claim for EA each year through your payroll software as claims will not automatically renew.