With effect 06/04/2016, the employment allowance has gone up to £3,000. Employers that pay Class 1 NI on their employees' and directors' earnings can claim the enhanced allowance from the current tax year.
This was introduced as an ongoing allowance. This means that once an employer has claimed the allowance, they will continue to enjoy it in future years, without needing to do anything further. However certain new conditions have been imposed this year for claiming the employment allowance and this mainly affects single director/owner limited companies.
A company is no longer eligible for the allowance if:
- only one employee (or director) in the limited company is paid above the secondary Threshold (the secondary threshold is set at £156 a week for the 2016 - 2017 tax year)
- that employee is a director of the limited company
Hence, if you are affected by the above change, at the start of the tax year you should stop your claim for employment allowance. Select ‘no’ in the ‘Employment Allowance claim’ field within your payroll software, and submit an Employment Payment Summary (EPS) to HMRC. The good news is this change doesn't affect the claims made in previous years.
If however the circumstances of the company changes during the tax year and more than one employee or director earns above the secondary threshold, then you’ll be eligible to claim the employment allowance for the whole tax year.