Top 5 tips for employment allowance claims

Posted on 14th January 2025 by David Rudd

After the recent Budget increase to employers national insurance rates, a lot of noise in the media was made around the impact of this (set to come into force from April 2025).

There is certainly some truth to this noise but for the vast majority of employers, the increase cost of employers national insurance will be offset by an increase in the amount of employment allowance which is claimable.

So, we thought we would put together “5 top tips” for you, which should help to explain more:

What is employment allowance?

Employment allowance was introduced with the purpose of reducing the cost of employing staff on businesses.  The idea is the business still calculates any employer national insurance due but reduces the value down each month by claiming the employment allowance.

For the tax year to end 05/04/25, the employment allowance stands at a maximum claim of £5,000.

Check if you’re eligible

As with most things related to HMRC, it is certainly worth checking the small print before launching ahead with your employment allowance claims.

A few key points to look out for:

• If you’re part of a group, you need to check the total employer’s national insurance for the whole group is less than £100,000, as employment allowance claims may be blocked when this is exceeded
• Only one employment allowance can be claimed within a group
• If you complete more than half of your work for the public sector, you can be blocked from claiming the allowance (charities have different rules though)
• Any business with only one director cannot claim employment allowance

When to claim

A business can claim employment allowance from April of each tax year, but you need to ensure you opt into the claims.  A few points here:

• If you use software to process your wages, ensure the correct claim boxes have been ticked, otherwise, you could miss out on claims (HMRC will not generally remind you to claim the allowance)
• Back claims for the previous 4 years are possible, so if your business has missed any claims you still have time to correct them, but you may need to contact HMRC directly as some software doesn’t handle historic claims well

Increased employment allowance from 06/04/25

From 6 April 2025, the value of employment allowance claimable is set to increase from £5,000 to £10,500.  The aim of this is to ease the impact of the employer national insurance rises from The Budget.

Be aware of the rules on claiming the allowance though, as it is highly likely HMRC will increase the amount of checks on claims moving forward.

Time to outsource your payroll?

With the ever-increasing complexity of running payroll correctly and navigating the increasing number of HMRC enquiries into this sector of tax, it may be time to consider whether now is the time to outsource running your payroll completely.

We are proud of our expert payroll team and would be more than happy to discuss how we can help to take away the administrative burden and worry of running payroll for you.

Next steps

We’d love to hear from you if you have any questions on the above tips. We’d be happy to help navigate this complex area with you.

This material has been prepared for informational guidance purposes only. Whilst every effort has been made to ensure the contents are accurate, information contained may not be comprehensive.  Furthermore, it is not intended to provide, and should not be relied on for, tax or accounting advice.  Steven Burton & Co Limited can not accept any liability for any errors or omission or for any person acting on or refraining from acting on the information provided.  Steven Burton & Co Limited are not financial advisors and are not regulated by the Financial Conduct Authority (FCA), so we can not give financial advice.