Employment Allowance Restriction – What Can You Do?

December 5, 2019

We’ve now seen the draft legislation concerning the restriction of the Employment Allowance to small employers.

The Employment Allowance is a relief worth up to £3,000 per year against an employer’s national insurance contributions.

If your secondary class 1 employers national insurance contrbutions exceed £100,000 in a tax year then you will not be entitled to the allowance in the following year, once the legislation bites.

So is there anything you can do if you’re just over the £100,000 limit? Not much as HMRC has already thought about how employers will try and get around it.

For example splitting your business into more than one will not work as related businesses will aggregated to determine if you’ve crossed the limit.

You are able to decide when you pay bonuses to your staff though, so if for one tax year you are just over the limit consider deferring bonuses to Apil instead of March, that will preserve the allowance for one more year.

One more wrinkle, the allowance is considered state aid and so if you receieve other state aid such as EIS relief or grant funding it needs to be disclosed.

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