A third of UK SMEs yet to claim their Employment Allowance

25th November 2014

A new report from HMRC has revealed around a third of all UK SMEs are yet to claim their Employment Allowance.

Over 850,000 SMEs are now benefitting from the scheme, which gives employers a reduction in National Insurance Contributions (NICs) that a business pays on their employees and is worth up to £2,000 for eligible businesses and charities.

With 1.25 million small businesses said to be eligible to claim Employment Allowance in the UK, the current take-up is said to be around 68 per cent.

John Allan, national chairman of the FSB, is keen to work with the Government to do more to encourage small firms to reduce the level of NICs SME owners pay on behalf of their employees.

“We’re really pleased to see so many businesses already taking advantage of the Employment Allowance,” said Allan.

“We called on Government to help small employers invest in staff, and now we see how this additional support has been spent.

“Our members have used the Allowance by paying workers more, hiring new people and increasing training.

“It’s also good to see a quarter of those that used the Allowance to hire new staff took on an apprentice.

“We will work with Government to raise the profile of the Employment Allowance so all the firms eligible, claim it.”

The new HMRC data has coincided with a recent survey from the Federation of Small Businesses (FSB) within the small business community regarding the Employment Allowance.

Over a third (35 per cent) of SMEs have either used the Allowance to increase wages or expand their workforce, while 20 per cent of SMEs have used the Allowance for either staff training or increasing hours for existing staff members.

Are you eligible?

Employment Allowance is available for almost all employers that pay Class 1 NICs on their employees’ and directors’ earnings.

This includes:

  • Businesses

  • Charities

  • Community amateur sports clubs

You are unable to claim Employment Allowance if you are a:

  • Domestic employer who employs someone for personal, household or domestic work, such as a nanny or gardener

  • Public body or business whose work is mainly of a public nature (e.g. local councils and NHS services) – unless you’re a charity

  • Service company with only deemed payments of employment income

You can claim your Employment Allowance at any time in the tax year through your payroll software.

Take a look at the government’s Employment Allowance calculator to see how the allowance could affect your employer NICs.

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