Employment Allowance – a tax saving opportunity for eligible companies

  • Employment Allowance – a tax saving opportunity for eligible companies 1

The Employment Allowance reduces the amount of National Insurance employers have to pay by up to £3,000 per year. So, can your limited company benefit from this tax incentive?

The scheme was implemented to help stimulate economic growth and encourage small firms to take on more employees. By using the scheme, a company can write off the first £3,000 of its overall Employers’ NIC bill each year.

The Allowance itself is ‘claimed’ each month via your firm’s payroll process, as the liability arises. So, no Employers’ NICs are payable until your company’s entire £3,000 allowance has been used up.

Is your limited company eligible to claim the EA?

  • You can only claim the Allowance if you pay Class 1 Employers’ National Insurance Contributions – as limited companies do.
  • The self-employed are ineligible to claim against any profits they draw down personally, as they pay Class 2 and Class 4 Contributions. However, they can claim if they have employees and make Class 1 NICs.
  • You cannot claim if you provide services to a public sector body.
  • Sole director companies without additional employees cannot claim the Allowance. So, if you’re a one-man-band, without employees, your company cannot claim the EA. Unfortunately, this does rule out a large proportion of professional contractors’ companies.
  • If your company does have one or more employees, at least one other person in addition to the director must be paid above the secondary NIC threshold of £8,424 per year (2018/19) to qualify.

For more information, please contact us

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