“Employers also need to be mindful of any additional thresholds, such as the Upper Earnings Limit. This is the point where employees’ NICs rates change, so you’ll need to consider this when calculating your total National Insurance liability.”

It’s important to stay up to date with any changes to National Insurance rates and thresholds, as this information can impact your overall tax obligations as an employer.

Understanding Class 1 National Insurance Contributions for Employers

Class 1 National Insurance Contributions (NICs) are calculated differently for employees and employers. Employers typically pay more in Class 1 NICs than employees. The rates at which Class 1 NICs are calculated vary based on the NICs threshold and the employee’s NI category. There are over 12 different NI categories, so it’s essential to refer to the Gov.uk pages for detailed information on NI rates, thresholds, and categories.

How to Stop Your Claim

If you are no longer eligible for the Employment Allowance, you can stop your claim by selecting ‘No’ in the ‘Employment Allowance indicator’ field in your next EPS. It’s important to note that reaching the £5,000 limit before the end of the tax year or no longer employing anyone does not automatically make you ineligible. If you stop your claim before the end of the tax year, any allowance granted during that year will be removed, and you will need to pay any employers’ (secondary) Class 1 National Insurance due.

Claiming the Employment Allowance

You can claim the Employment Allowance at any point during the tax year. The earlier you claim, the sooner you will receive your allowance. If you claim late and do not utilize the allowance against your employers’ Class 1 National Insurance liabilities, HMRC may use any unclaimed allowance to offset any tax or National Insurance owed or provide a refund after the tax year ends.

Utilizing Your Allowance

You can start using your Employment Allowance as soon as your claim is submitted, without waiting for a confirmation letter from HMRC. If your claim is rejected, HMRC will send an automated message within five working days. You can track the amount of Employment Allowance used in your HMRC online account.

De Minimis State Aid

If your Employment Allowance is considered de minimis state aid due to including a business sector in your claim, HMRC will send a letter confirming this status. It is essential to keep this letter as it may be required when applying for other de minimis state aid.

Additional Resources

For more information on employing staff and managing employment costs effectively, consider following the 8 key steps outlined to ensure a productive relationship with new employees.

By understanding the intricacies of Class 1 National Insurance Contributions and the Employment Allowance, employers can navigate their obligations effectively while maximizing available benefits.