Employment Allowance Guide

The allowance is designed to reduce the Employers National Insurance for small businesses by up to £2000 and best of all, it's very easy to claim.

The Basics

The allowance started on 6 April 2014 and is planned to continue into future years.

Do I qualify?

The Employment Allowance can be claimed by Limited Companies, Sole Traders and Partnerships that have employees. It can be claimed by businesses, charities and community amateur sports clubs.

The Employment Allowances is available to Limited companies that do not employ any other staff except the directors.

The Employment allowance cannot be used by Sole Traders or Partnerships that have no employees.

If operating under IR35 then the Employment Allowance does not apply.

There is also a specific list of excluded employers.

How to claim

You claim the Employment Allowance as part of your RTI submission. This can either be though your own payroll software, HMRCs Basic PAYE Tools or we can operate your payroll on your behalf, in which case we will make the claim for you.

When you make the claim you will reduce your employers National Insurance in a cumulative way upto the £2000 per year.


If an employer’s National Insurance is £1,200 a month, in April the Employment Allowance used will be £1,200 and in May £800, as the maximum reduction is capped at £2,000.

Software specific Guides:


Sage One Payroll

Sage 50 Payroll and Sage Instant Payroll.

Other things to consider

The allowance can only be claimed against a single PAYE scheme. (There are some businesses that operate more than one scheme)

A claim can be moved to another PAYE scheme, but not during the current tax year. You need to stop claiming for one scheme before the end of the current tax year, and nominate an alternative scheme before the new tax year begins.

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