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The NICs Employment Allowance and one-man-band companies

The NICs Employment Allowance and one-man-band companies

Since April 2014, employers have enjoyed a reduction of up to £2,000 in their NICs bills. This is known as the Employment Allowance and, for many companies, it means that no Secondary Class 1 NICs are payable. From April 2016, the maximum amount of the employment allowance will increase from £2,000 to £3,000. However, it is not all good news as, from the same date, one-man-band companies are prevented from claiming the Employment Allowance.

Legislation setting out this exclusion was published this week. Briefly, a company is prevented from claiming the Employment Allowance for a tax year where:

  1. all payments of salary for that year are paid to one employee; and
  2. that employee is a director of the company.

There was concern that the exclusion would apply more widely; for example, to family-run companies where there is more than one employee but all of the employees are related. Thankfully, this is not the case.

The Employment Allowance may be claimed via payroll software or HMRC’s basic PAYE tools. Employers have 4 years to make a claim and so it is not too late to make a claim for 2014/15. A number of exclusions apply; for example, employing a nanny.

If you would like some assistance or have any questions on the above or any other areas of accounting or tax, please contact us at hello@applauseaccountancy.co.uk

Applause Accountancy Services Limited takes every care in preparing material to ensure that the content is accurate and up to date. However, no responsibility for loss for anyone acting from or refraining from acting as a result of this information can be accepted by Applause Accountancy Services Limited.


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