New for 2014-15 - Employment Allowance

NIC Employment Allowance

With effect from 06th April 2014 an NIC Employment Allowance will be available to claim by eligible employers.

Businesses, Charities and Community Amateur Sports Clubs will be able to reduce their NICs bill by up to £2,000 per year. The Employment Allowance is to be set against an employer’s liability for secondary Class 1 National Insurance Contributions (NICs) only, not against other NICs such as primary (employee’s) Class 1, Class 1A or Class 1B contributions.

You cannot claim the Employment Allowance, for example if you:

• employ someone for personal, household or domestic work, such as a nanny, au pair, chauffeur, gardener, care support worker
• already claim the allowance through a connected company or charity 
• are a public authority, this includes; local, district, town and parish councils
• carry out functions either wholly or mainly of a public nature (unless you have charitable status), for example:

- NHS services
- General Practitioner services
- the managing of housing stock owned by or for a local council
- providing a meals on wheels service for a local council 
- refuse collection for a local council
- prison services
- collecting debt for a government department

You do not carry out a function of a public nature, if you are:

• providing security and cleaning services for a public building, such as government or local council offices
• supplying IT services for a government department or local council

To check your eligibility and get further information about the Employment Allowance go to Employment Allowance Eligibility.

The greatest benefit of this allowance goes to small businesses, as it will reduce their National Insurance Contributions bill the most. Over 90% of the benefit of this allowance will go to small businesses with fewer than 50 employees.

This will also mean that businesses will be able to employ four adults or ten 18-20 year-olds full-time on the National Minimum Wage without paying any employer National Insurance contributions at all.

The claim process for eligible employers is very straightforward and is administered via BrightPay and is merely a flag on the Employer Payment Summary (EPS) submission via RTI, notifying HMRC that they are claiming the employment allowance.

HMRC have published an Employment Allowance calculator which allows you to see the effect of the Employment Allowance in 2014. For example, you can see the effect on your National Insurance Contributions bill of employing one additional person or you can look at the reduction to your current National Insurance Contributions payments.

Simply follow the link to access the calculator, Employment Allowance Calculator

Claiming the Employment Allowance in BrightPay 2014/15

The HMRC require employers to indicate on the EPS submission that they are claiming the Employment Allowance. There is no requirement to enter a claim value within the actual EPS submission.

To prepare an EPS for submission you must first setup the HMRC Payments schedule.

• Choose HMRC Payments menu item.
• Choose the agreed payment frequency between you and HMRC, monthly or quarterly
• For 2014/15 you will see a new option in the NICs column Employment Allowance Claim
• To include the claim for Employment Allowance select Enable

• The claim for the Employment Allowance is made via the EPS, indicate if you now wish to create the EPS for submission or Cancel this option.

If you choose not to create the EPS now, you can do this at a later stage from the RTI menu once the HMRC payment for the period is updated with an amount payable and payment date (RTI> New> EPS>).