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Small employers risk losing the employment allowance in 2020

16th August 2019

Plans to remove the employment allowance for large employers from April 2020 could have a domino effect on smaller firms.

The employment allowance currently provides employers with a reduction of up to £3,000 to their national insurance contributions (NICs) bill.

From April 2020, employers will only be eligible for the allowance if their total secondary class 1 NICs liability for the previous year was less than £100,000.

Employers have to claim the allowance each year in order to receive it, but relief will no longer be carried forward from one tax year to the next from April 2020.

Smaller employers could face problems due to the maximum amount of de minimis state aid they can receive in any three-year period.

Jon Stride, co-chair of the Association of Taxation Technician's technical steering group, said:

"The classification of the employment allowance as state aid will have consequences for all employers, regardless of their size.

"If an employer receives other forms of state aid, whether a grant or tax break, this may affect their ability to claim the employment allowance in the future.

"Small employers that receive grants or tax breaks because they are doing well will no longer be able to receive the existing reduction to their NICs bill.

"Employers need to ensure they have the capacity for the full £3,000 employment allowance within their de minimis state aid ceiling, regardless of how much of the allowance they actually claim."

Speak to us about the employment allowance.

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