The Employment Allowance (EA) is a £5,000 allowance set against employer National Insurance Contributions (NICs) and has to be claimed each tax year by qualifying employers.
The EA was increased from £4,000 to £5,000 this tax year to help to soften the blow of the 1.25% increase in employer contributions, now calculated at 15.05%.
If two or more companies or charities are connected with one another, then only one of them may claim the EA.
Employers are not eligible to claim the EA where their employers’ Class 1 National Insurance liabilities in the previous tax year exceeded £100,000.
Another important exclusion from the EA are single director companies where the director is the sole employee of the company.
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