Introduced in April 2014, the Employment Allowance (EA) has enabled certain businesses and charities to reduce their Class 1 National Insurance Contributions (NIC) bill. EA is currently claimed by over 1.1 million employers and allows them to decrease their employer NIC by up to £3,000.

From 6 April 2020, not all businesses who currently benefit from EA will be able to claim the allowance in the 2020/21 tax year.

The EA was introduced to support businesses to grow and hire new staff. To focus business support to those who need it the most, the relief will be restricted to help smaller businesses with the costs of taking on more staff.

The changes:

  • Effective 6 April 2020, employers who, together with their connected companies, have an Employer’s National Insurance bill of £100,000 or more in the preceding tax year are no longer eligible to claim;
  • EA must be claimed each year by submitting a declaration;
  • Relief will no longer be carried forward from one tax year to the next as currently;
  • EA will now classed as de minimis state aid (StA), meaning that employers must be able to accommodate the £3,000 EA within their state aid limit. If any other form of state aid has been received, it may restrict the ability to claim for EA.

These changes relate to EU legislation, however it is thought the UK will adhere to these changes, for the transition period as a minimum, when Brexit happens.

Should you require any help in deciding whether or not your organisation qualifies for EA in the future, then please get in touch with your M+A team.