The Employers' National Insurance Contributions (NICs) allowance is an allowance given to qualifying employers to offset against their annual Employers' National Insurance liabilities. It is not a repayable credit.

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At a glance

The Employers' National Insurance Contributions (NICs) allowance is an allowance given to small and medium sized employers to offset against their annual Employers' National Insurance liabilities.

It is not a repayable credit.

Qualifying UK employers may claim an Employment Allowance to offset against employer’s NICs (ER’s NICs) and so reduce the payroll cost of being an employer.

The allowance increased to £4,000 from 6 April 2020.

It was previously £3,000 from 6 April 2016 to 2019-20 and £2,000 for 2014-15 and 2015-16.

The allowance:

  • Is available to qualifying employers.
  • Is claimed via your payroll software.
  • Can all be claimed in week 1/month 1 if sufficient Class 1 NICs are paid by the employer.

Excepted employers

The allowance may not be claimed by an employer if:

  • From 6 April 2020: its a secondary NICs bill is in excess of £100,000 per year.
  • From April 2016: if the company's only employee is the sole director.
  • It is a company with whose director is the only employee being paid above the class 1 NICs secondary threhold.
  • It is already being claimed by a connected company or Limited Liability Partnership (LLP), the connection test is based on the associated company rules.
  • No salary is paid, only a deemed payment calculated under IR35.
  • It is a connected charity or community amateur sports club, the connection test is based on the Gift Aid Small Donations tests.
  • Its employees consist of purely domestic staff, such as a nanny, chauffeur or gardener.
  • From 6 April 2015, a personal care or support worker will be a qualifying employee.
  • It carries on functions either wholly or mainly of a public nature.

There are also restrictions following the merger of two businesses which have claimed the allowance up until that point in the tax year.

Further details and worked examples

See Employer's NICs allowance

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