What is the Employment Allowance?

Definition of the Employment Allowance

The Employment Allowance is a reduction of up to £4,000 a year in employer's National Insurance (NI) for certain employers.

The Employment Allowance started on 6th April 2014. It is set against the employer's NI that would have been paid, up to £4,000 a year. Only businesses with an employer’s NI liability of under £100,000 a year are eligible to claim the allowance.

The Employment Allowance can't be used against PAYE or employee's NI unless an employer has overpaid employer’s NI as a result of not using the allowance.

Limited company directors who are the sole employee of their companies do not qualify for the Employment Allowance and certain other employers, such as those employing domestic workers and those whose staff carry out more than 50% of their work in the public sector (with certain exceptions), are not eligible.

Disclaimer: The content included in this glossary is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this glossary. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.

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