As from 6 April 2014 UK employers can reduce their NICs bill by £2,000 – the so-called “employment allowance”. It is estimated that up to 1.25 million businesses and charities will benefit from employment allowance. Around 450,000 businesses and charities won’t have to pay any employer NICs at all – but only if they remember to claim.

  • The employment allowance can be claimed by any business or charity (subject to a few exceptions, primarily domestic employment and businesses with a public function eg GP/dentists) that pays NICs on employees’ or directors’ earnings.
  • It is set against the employer’s entire Class 1 NIC liability each week or month until the maximum £2,000 entitlement is used up.
  • It cannot be set against Class 1A or Class 1B employer NICs.
  • Employers can use their own payroll software or HMRC’s Basic PAYE Tools to claim.

There are some special rules for groups of companies or where more than one PAYE scheme is in operation.

And while we are on the subject of NICs don’t forget that from 6 April 2015 employers will pay no secondary contributions where their employees are under 21 and earn less than £41,860. This is expected to lift approximately 1.5 million employees out of employer NICs altogether.