Employment Allowance can reduce the amount of Class 1 National Insurance that employers have to pay by up to £3,000 per year. CEO of APHC, John Thompson explains more.
Most plumbing and heating employers should be able to claim the government’s Employment Allowance, assuming they are paying employers’ Class 1 National Insurance on salaries above the secondary National Insurance Contribution threshold, which is currently £8,424 per year (2018/19).
You can't claim the Allowance if you're the director and sole employee and are paid a salary which is over the secondary National Insurance Contribution threshold. Self-employed plumbers and heating engineers, i.e. those who don't operate via a limited company, are also ineligible to claim against any profits they draw down personally, as they pay Class 2 and Class 4 National Insurance Contributions. However, they can claim if they have employees and make Class 1 National Insurance Contributions.
For those who are eligible, the Allowance itself is claimed each month via each employer's payroll process. No employers’ Class 1 National Insurance Contributions are payable until your company’s £3,000 allowance has been used up.
You can claim at any time in the tax year. If you claim late and don’t use your Allowance, you can ask HMRC to either use any unclaimed allowance at the end of the year to pay any tax or National Insurance you owe - including VAT and Corporation Tax if you don’t owe anything on your PAYE bill. Or you can request a refund from HMRC after the end of the tax year if you don’t owe anything.
If you haven’t claimed in previous tax years, you can claim £2,000 for each previous tax year dating back to 2014/15.
Importantly, you will only benefit from this Allowance if you pay yourself and your employees high enough salaries on which to incur and claim back Employers’ National Insurance Contributions – i.e. salaries over the secondary National Insurance Contributions threshold of £8,424 per year (2018/19).
There are certain restrictions surrounding eligibility, so it is advisable to take guidance from a professional accountant.