Employers given £1,000 saving thanks to rise in Employment Allowance

First announced by the Chancellor in the Spring Statement, changes to the employment allowances, worth up to £1,000 for eligible small businesses, came into effect on 6 April.

The Employment Allowance now allows eligible employers to reduce their annual National Insurance liability by up to £5,000 – up from £4,000 – helping nearly half a million businesses in the UK to cut their bill.

So, what does this mean for you and your business?

Employment Allowance

Due to the increase, smaller companies will be able to claim up to £5,000 off their employer National Insurance Contributions (NICs).

This applies if the NICs bills were £100,000 or less in the previous tax year.

In a bid to reduce employment costs, the change allows an additional 50,000 businesses to get out of paying NICs and the Health and Social Care Levy.

As a result, the total number of businesses not paying NICs and the Levy will rise to 670,000.

They will also be able to employ four full-time employees on the National Living Wage without paying any employer NICs whatsoever.

The Chancellor, Rishi Sunak, commented on the changes:

“This tax cut for half a million businesses will help them thrive and grow to help drive our economic recovery.

“It comes on top of a suite of wider tax cuts available to firms, including 50% business rates relief, a record fuel duty cut and the super-deduction, the largest two-year business tax cut in our history.”

Who will benefit?

Small and micro businesses make up 94 per cent of those benefitting from the £1,000 increase.

The sectors that will feel the most positive impact are:

• The wholesale and retail sector (87,000)
• The professional, scientific and technical activities industry (63,000)
• The construction sector (52,000).

The increased allowance will be available through payroll software where this has been updated, or through a payroll adjustment.

Check if you are eligible to claim for Employment Allowance here.

For help and advice on related matters please contact our expert team.