What is the Employment Allowance?
Employment Allowance is a government initiative that allows eligible employers to reduce their National Insurance liability by up to £5,000 for the 2024/25 tax year.
This figure will increase to £10,500 in April 2025, as announced by the Chancellor in the October 2024 budget statement.
How do you apply for Employment Allowance?
There is no fixed time for making your claim. You can do it at any point during the tax year, as part of your Real Time Information (RTI) submission to HMRC.
This is processed through your software via an EPS (Employer Payment Summary)
To claim the allowance, you will need to submit an EPS every year. If you fail to submit EPS, you will be liable to pay NI regardless if you qualify.
How do I check and apply for Employment Allowance on Buddy?
First, you will need to make sure you have updated the Settings to claim Employment Allowance within the EPS:
- Go to the Company Settings
- Click on the Payroll sub-menu
- Scroll to Tax Reliefs
- Enable to tab Claim Employment Allowance, checking the tax year you are claiming from.
Small Employer's Relief
If this is your first year on Buddy, insert the NI Contributions for the previous year; this will automatically enable the Relief if this is below the threshold.
The claim will automatically be automated for companies whose previous year was processed on Buddy.
When triggered, the P30 and P32s will claim an additional percentage over statutory payments, aimed at helping small employers.
Submitting EPS
Check out the below article to learn how to manage EPS submissions:
Tax Forms: P30, P32 and EPS Submissions
Who Qualifies for the Employment Allowance?
- You will need to be a registered employer
- You are a sole trader, limited company or partnership that has employees
- You have a limited company that only employs its directors, where two or more directors earn more than the secondary threshold for Class 1 NI contributions. If you are a company with just one director, take a look at the HMRC guidance on GOV.UK for further information.
Note: If you are a director of more than one company with significant control that have a registered PAYE Scheme you can only claim the allowance on one company.
It is recommend to claim this on the company with the biggest liability to ensure you can take advance and claim the full entitlement.
You may find that you no longer qualify for the Employment Allowance at some point during the tax year, and if this happens you should to make a resubmission to HMRC, letting them know of the change.
For the latest qualifying details from the HMRC have a look at their page: https://www.gov.uk/claim-employment-allowance/eligibility