There is a change coming up in rules for eligibility for Employment Allowance from 6th April 2020. It is the duty of each employer to check if they meet the new eligibility criteria to claim this allowance.

The salient eligibility rules are as follows:

• An employer can only claim the Employment Allowances for the tax year 2020/2021. If the total for employers’ National Insurance contribution is below the threshold of £100,000 in the previous tax year.
• An employer cannot claim the allowance for deemed payments of employment income. They are not included in the total cost of up to £100,000 for employers’ National Insurance contribution.
• If there is more than one payroll scheme registered within the connected companies. The employer will need to add the total liabilities from all those companies to see they are still within the threshold.
• An employer will have to check they will not exceed the de minimis state aid threshold, if applicable.

In Budget 2020 it was announced that the Employment Allowance would increase from £3,000 to £4,000 from 6th April 2020 thus helping to reduce the employers’ National Insurance contribution liabilities for SMEs.

In the tax years before 2020-21 the Employment Allowance claim auto-renewed, as in the employer did not have to make separate claims every tax year. But this is changing from 6th April 2020 onwards. The method of claiming through the Employer Payment Summary remains the same, but the employer will have to make a new claim for the Employment Allowance to HMRC each tax year.