Restricted Employment Allowance

The employment allowance is currently worth up to £4,000 per year but can only be claimed by companies with at least one employee other than the sole director.

From April 2020 the allowance will also be restricted to employers whose Class 1 NIC liability was less than £100,000 in 2019-20. This cap is the sum total of all employer Class 1 NIC liabilities across the group of connected companies or across all payrolls run by that company or group.

A further complication from April 2020 is that the employment allowance will count as de minimis state aid which has an upper limit permitted for each business. This limit varies from €20,000 to €200,000 for each two-year period depending on the industry sector.

Because of these new restrictions you will need to make a fresh claim for the employment allowance for 2020-21 on the EPS form and you will need to know:

  • which trade sector your business operates in (agriculture, fisheries and aquaculture, road freight transport or industrial/other);
  • the amount of state aid your business has received or anticipates to receive in the years 2018-19 to 2020-21; and
  • whether the amount of Class 1 employer’s NIC paid for 2019-20 was £100,000 or more.

Your payroll software should be updated for 2020-21 to include fields for this extra information on the EPS.

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