Employment Allowance (E/A): Hand in hand with Auto Enrolment

21st July 2022

In 2014 HMRC set up the Employment allowance which was a way of giving back to employers who took on more staff, the way the allowance works is that your employers national insurance liabilities are reduced by the allowance up to £2,000 or by the tax year end which ever was reached first.

 

Since the start the employment allowance has been raised several times:

6th April 2014 to 5th April 2016 you could claim £2,000

6th April 2016 to 5th April 2020 you could claim £3,000

6th April 2020 to 5th April 2022 you could claim £4,000

6th April 2022 you can claim £5,000

 

Companies and Charities that have a PAYE scheme with employer’s national insurance liabilities under £100,000 in previous years and have an eligible employee can claim the allowance, it’s also worth knowing that you can claim up to 4 previous tax years so currently that would be the 2018/2019 tax year.

 

Historically, the eligibility of director only payrolls to claim the EA has been something of a grey area, but as most director only payrolls have not attracted national insurance contributions, it has not been much of an issue. However, the increase in the Primary Threshold to £12,570 this tax year has raised the issue of auto-enrolment as director salaries have increased to take advantage of the higher amount.

 

The auto-enrolment threshold is £10,000. Director only companies can be exempted from auto-enrolment under certain circumstances. A company can only claim the E/A if they have an employee earning above the Secondary Threshold. If a director, earning above the Secondary Threshold is deemed to be an employee of the company, then the company MUST have an auto-enrolment scheme & any employee earning above £10,000 has to be enrolled.

 

If you are unsure if you are eligible for the Employment allowance or, if you need an auto enrolment pension scheme, please contact the payroll team at the Ely office who would be happy to help. Who knows we may even be able to save your company money?

Disclaimer - All information in this post was correct at time of writing.
Other Blogs
Jaimie King
19th April 2024 Audit exemption limits set to rise

What could the changes to Audit exemption limits mean for you?   The government has recently announced changes to company law that will see company size thresholds increased by 50%. This is hoped to reduce complexity and additional burden for companies. These changes are intended to be in place for year ends commencing on or…

Paul Jefferson
18th April 2024 Beware of VAT refund fraud

Beware of VAT refund fraud!   We have become aware of several recent cases where taxpayers’ bank account details have been amended on the HMRC portal, without their knowledge, so that VAT repayments have been fraudulently diverted to a third party.   It seems that HMRC have been acting on the basis of a fraudulent…

Andrew Band
17th April 2024 Whitings 2024 Annual Farming Seminar

Our Whitings 2024 Annual Farming Seminar is just around the corner.   Farming always has to cope with changing environment, weather, commodity prices, political changes, etc. This year these challenges feel heightened and this is why we are pleased to welcome back speakers from the Andersons Centre to inform us of these changes and what…

Amanda Newman
17th April 2024 Buy To Let through a Limited Company

There continues to be an ongoing debate when buying a residential property to let out about whether to buy this personally or set up a limited company to own it. Unlike our sole trader v limited company comparisons for a trading business there is not a clear division based on profits. There are a lot…

Nick Edgley
11th April 2024 Do you need to re-register for Child Benefits?

If you’ve heard about the changes post 5 April 2024 and are wondering whether you need to re-register for Child Benefits, this is the blog post for you.   If you have been affected by the increase in the High Income Child Benefit Charge cap to £60,000, then you may need to restart your Child…

Peter Brown
10th April 2024 Pension Contributions for directors

Are you thinking about planning ahead for retirement and want to find out more about Pension Contributions for directors?   When it comes to planning for your retirement, Company pension contributions can offer significant benefits in terms of reducing your company’s Corporation Tax bill. Here’s how you can use both personal and company contributions to…