Increases to maximum amount of employment allowance
Operation of employment allowance
The employment allowance (EA) enables employers to get money off their National Insurance (NI) bill. It works by allowing you to reduce your secondary Class 1 NI payments each time you run your staff payroll until the maximum amount has been used up or the tax year ends, whichever comes sooner (see Follow up ).
New maximum amount
The Employment Allowance (Increase of Maximum Amount) Regulations 2020 (SI 2020/273) (see Follow up ) came into force on 6 April 2020 and they amend the National Insurance Contributions Act 2014 so as to increase the maximum amount of the EA from £3,000 to £4,000 for tax year 2020/21 and subsequent tax years.
Pro advice 1. You can still claim the EA if you pay less than £4,000 Class 1 NI a year.
Pro advice 2. You can’t claim if you’re the director and only employee of a limited company. You also now can’t claim if your secondary Class 1 NI bill was £100,000+ in the previous tax year.
Government guidance on employment allowance
Employment Allowance (Increase of Maximum Amount) Regulations 2020
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