National Insurance Contributions (NIC) Employment Allowance

The NIC Employment Allowance is an annual allowance which is available to many Employers and can be offset against their Employer NIC liability. When it was first introduced in April 2014, people employing care and support workers were specifically excluded. However the then Chancellor George Osborne announced in December 2014 that from April 2015, the government would also extend the annual NIC Employment Allowance to those households that employ care and support workers. This goes some way towards compensating for the fact that Employers can no longer claim back Statutory Sick Pay.

In January 2016, HMRC announced that this alllowance would increase by £1,000 to £3,000 from April 2016.      

This allowance does not mean that you will receive £3,000 into your bank account each 6th April. Instead, it reduces the amount of Employer’s National Insurance you pay to HMRC, up to £3,000 in a tax year. So if you usually pay less than £32,000 to HMRC a year in respect of Employer’s NI, it will eliminate this bill completely – but remember you will still have to deduct Employee’s NI and PAYE from your staff’s wages and pay those over to HMRC.

If you are using a Payroll Service the allowance will automatically be applied.  If you are doing your own returns using HMRC Basic Tools or other payroll software you will be prompted to put ‘Yes’ in the ‘Employment Allowance indicator’ field when you send an Employment Payment Summary (EPS) to HMRC. You will only have to do this once; once set, the claim will continue automatically from year to year.