Employment Allowance Claimed By Nearly 1.2 Million Employers

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July 7th 2020
Tax Week 14
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Employment Allowance Claimed By Nearly 1.2 Million Employers

Employment Allowance of £3,000 can remove the Employers' NIC bill for three full-time employees paid minimum wage.

Since April 2014, Employment Allowance has been available to employers to cut their Employers' National Insurance Contribution payment in any tax year by up to £2,000. The £2,000 limit was raised to £3,000 in April 2016 along with some tightening of rules to prevent usage of the allowance by sole employee/director companies as well as removal of the allowance for public sector companies (where over half of the work is public sector related).

When the allowance was introduced it was intended to be able to remove Employers' NIC costs for up to four employees who are being paid the then National Minimum Wage. The adjustment made in 2016 to increase the allowance continues this objective. 90,000 businesses were expected to have their Employer NIC bills reduced to zero.

The annual Class 1 Employers' NIC bill for an employee on minimum wage, a full-time salary around £14,760 this year, would be £874. Statistics released this month show 1.178 million employers claimed the allowance to some extent during the 2017/2018 tax year.

The top sector claiming the allowance was 'Wholesale and retail trade; repair of motor vehicles and motorcycles' with 196,000 employers - this made up 17 percent of all claims. Top sectors were:

  • Wholesale and retail trade; repair of motor vehicles and motorcycles - 196,000 - 17 percent
  • Professional, scientific and technical activities - 155,000 - 13 percent
  • Construction - 132,000 - 11 percent
  • Accommodation and food service activities - 109,000 - 9 percent
  • Administrative and support service activities - 108,000 - 9 percent

Most employers claiming the allowance had less than 9 employees.

  • 951,000 employers with between 1-9 employees - 81 percent of claims
  • 189,000 employers with between 10-49 employees - 16 percent of claims
  • 32,000 employers with between 50-249 employees - 3 percent of claims
  • 6,000 employers with 250 or more employees - less than 1 percent of claims
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