If you’re a business owner, then you know that pennies make pounds, and you’ll be fully aware of how important it is to take advantage of reliefs and savings to help make your cashflow work.
One handy source of yearly tax relief – which may or may not be on your radar – is the Employment Allowance.
As a UK employer, you certainly want Employment Allowance to be part of your tax relief strategy, because of the potential reduction in tax liability it offers eligible employers.
How much can you save with Employment Allowance?
The measure is designed to support smaller employers with their employment costs. In the 2024/25 tax year, businesses can reduce their National Insurance liability by up to £5,000. From 6 April 2025, this figure will rise to £10,500.
Here’s how it works…
As an employer, you’ll pay less employers’ Class 1 National Insurance each time you run your payroll until the £5,000 (or £10,500 from the 2025/26 tax year onwards) has gone or the tax year ends, whichever is sooner.
You can claim against your employers’ Class 1 National Insurance liability up to a maximum of £5,000 each tax year. You can still claim the allowance if your liability was less than £5,000 a year.
What makes you eligible?
- Are you a registered employer? A sole trader, limited company or partnership that has employees?
- Is your company a limited company which employs only directors, where two or more directors earn more than the secondary threshold for Class 1 National Insurance contributions?
- Were your employers’ Class 1 National Insurance liabilities less than £100,000 in the previous tax year? Off-payroll workers can’t be included in your calculations; they do not count towards the £100,000 threshold. (Please note: This restriction will be removed from 6 April 2025 as announced in the Autumn Budget. Visit gov.uk for further details.)
Bear in mind that only one company within a group of companies can claim the allowance. You can only claim Employment Allowance against one of the payrolls. The allowance is considered de minimis state aid if you produce or sell goods and services, and there is a cap on how much aid you can receive. You can find more details on eligibility here: https://www.gov.uk/claim-employment-allowance/eligibility
How your accountant can help
A key part of your accountant’s job is to help you keep track of the tax reliefs and liabilities you may be entitled to.
When you’re a Champion client, you can rest assured that you will receive the guidance you need to take full advantage of the various tax incentives and allowances available to UK businesses of your size and industry, as well as those specific to the activities you engage in such as research and innovation.
But we don’t just “set it and forget it” – we keep up with the latest developments and announcements regarding UK tax regulations and policies, such as those which form part of the Spring and Autumn Budget.
We’re proactive and we take the burden off our clients’ shoulders so they can focus on running their business, instead of worrying about their tax positioning or payroll.
If you’d like to learn more about Champion’s fully digitalised payroll service, which features state of the art payroll technologies including BrightPay and Modulr, please contact a member of our team on 0161 703 2500 or email payroll-manchester@champion-accountants.co.uk.
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