What is the Employment Allowance?
Definition of the Employment Allowance
The Employment Allowance is a reduction of up to £5,000 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 £5,000 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 companies that only pay employer's National Insurance on one employee's wages do not qualify for the Employment Allowance if that employee is also a director of the company. Certain other employers are not eligible, 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).