Claim the employment allowance for 202324
If you’re running a business or charity in the UK, you’ve likely heard of the employment allowance—but do you know whether you can claim it for 2023–24? This valuable tax relief can reduce your National Insurance contributions significantly, yet many eligible employers miss out simply because they’re unsure about the eligibility criteria or how to apply. At Severn Accounting, we want to make sure you’re not leaving money on the table.
What is the employment allowance?
The employment allowance is a relief that allows eligible employers to reduce their annual Pay As You Earn (PAYE) liability by up to £5,000 per tax year. Rather than paying National Insurance on every employee’s salary up to the threshold, you can claim an allowance that effectively covers the first £5,000 of your secondary National Insurance bill. For many small businesses, this can mean paying significantly less—or nothing at all—in employer National Insurance.
It’s important to understand that this isn’t a payment you receive; it’s a reduction against what you owe. If your annual National Insurance bill is under £5,000, the allowance covers all of it. If it’s higher, you benefit from the £5,000 reduction.
Who can claim the employment allowance?
Not every employer is eligible, so it’s crucial to check whether your business qualifies before applying. Generally, you can claim if you’re:
- A business with a PAYE payroll (sole trader, partnership, or limited company)
- A charity
- A community interest company
- A non-profit body
- An unincorporated association
However, there are specific exclusions. If you’re a director of a company and the only employee (paying yourself through PAYE), you cannot claim. Similarly, if you’re a partnership where all members are employees, you’re ineligible. Recruitment agencies and businesses where the main activity is supply labour cannot claim either.
The key threshold is your pay bill. For 2023–24, if your annual pay bill is less than £100,000, you cannot claim the employment allowance. Your pay bill includes all salaries and wages you pay employees, but excludes benefits and pension contributions. This means many micro-businesses with just one or two staff members won’t qualify.
How do you claim?
Claiming the employment allowance is straightforward, but the process depends on your circumstances.
For most employers, you claim through your PAYE Online account on the HMRC portal. You’ll need to log in, navigate to the employment allowance section, and submit your claim. The system will guide you through a series of questions to confirm your eligibility. Claims for the current tax year can be submitted from 6 April onwards, and there’s no strict deadline—though claiming early ensures you benefit from the relief throughout the year rather than waiting for a refund later.
If you’re a charity, the process is similar, but you’ll need to provide your charity registration number during the application.
First-time claimants should allow a few weeks for HMRC to process the claim. Once approved, the allowance is applied automatically to your PAYE payments going forward. If you’ve already paid more than necessary during the tax year, HMRC will refund the difference.
What if circumstances change?
It’s vital to notify HMRC if your situation changes mid-year. If your pay bill falls below £100,000 or you become ineligible for any reason, you must withdraw your claim. Conversely, if you’re claiming for the first time and become eligible, submit your claim as soon as possible. You can also change or withdraw your claim through your PAYE Online account.
A final word on planning
If you’re borderline on the £100,000 pay bill threshold, it’s worth reviewing your payroll carefully. The threshold is calculated on the pay bill for the full tax year, so understanding exactly where you stand is essential. Some employers also benefit from claiming the allowance even if their National Insurance bill is minimal, simply to ensure they’re using every available relief.
For tailored advice on whether you’re eligible, how to claim, or how much you could save, our team at Severn Accounting can review your specific circumstances. Employment allowance can make a real difference to cash flow, particularly for charities and social enterprises where every penny counts.
For tailored advice, contact Severn Accounting — we’re here to help.