Single-director companies will not be eligible to claim the National Insurance Contributions Employment Allowance for the new tax year 2016-17. The employment allowance for the new tax year 2016-17 will be £3,000, an increase from £2,000 from 2015-16.
Employment Allowance Guidance to changes from 6th April 2016:
• If the only employee is a director of a limited company and paid wages above the Secondary Threshold for Class 1 National Insurance contributions the Employment Allowance will no longer be eligible for claiming. The Secondary Threshold is £156 per week for 2016-17.
• If there is a limited company with a number of employees and a director is one of these employees where the director is the only employee to be paid over the Secondary Threshold, the limited company can no longer claim the Employment Allowance.
For 2016-17 if you are not eligible to claim the Employment Allowance you must not claim it and ensure that the full amount of employer Class 1 National Insurance contributions are paid.
If throughout the 2016-17 tax year the circumstances of the limited company change where more than one employee or director is paid wages above the Secondary Threshold, the company will be able to claim the Employment Allowance for the full tax year. Such companies include where:
1. All employees are directors where they both are paid wages above the Secondary Threshold
2. The directors that are employed are husband and wife and both are paid wages above the Secondary Threshold
3. If seasonal employees are employed and one or more employees are paid wages above the Secondary Threshold in a week
4. If the employee is the only UK based worker of an international company and is paid wages above the Secondary Threshold in a week and meets the other eligibility criteria.
Basically the eligibility to claim the Employment Allowance is determined on if the additional employee is paid wages above the Secondary Threshold of £156 in 2016-17 or directors must be paid above the Annual Secondary Threshold of £8,112 or on a pro-rata basis if the directorship commenced after the start of the tax year.