How the new Employment Allowance will affect you

Since our post on the Employment Allowance at the beginning of April, there has been a lot of discussion between small businesses regarding what the allowance will mean for them. Many people are uncertain about whether or not they are able to claim, and how it will affect their business, as well as the economy as a whole. We’ve compiled a list of just some of the positive (and a few not-so-positive) effects of the allowance…

  • The allowance encourages employers to take on more staff. With the money saved by the £2,000 cut, employers are encouraged to take on new additions, helping their business to grow whilst also helping more people find work.
  • In spite of this suggestion, businesses are free to use their allowance however they wish. This means that struggling businesses can use the money they save to help their company’s cashflow. The money can be spent on a small business accountant who can help them better manage their finances or simply be a monthly saving.
  • Either of these options will ultimately help the economy. By giving small businesses a chance to grow, as well as creating job opportunities, the allowance is expected to help around 1.25 million businesses and countless job seekers.
  • It’s simple to do. The allowance can be claimed either through payroll software or through HMRC’s Basic PAYE Tools and is as simple as ticking a box. There’s no stacks of paperwork, and it can be done from the comfort of your home or office.
  • Most people can claim. If you are a business or charity that pays employer Class 1 NICs on your employees’ or directors’ earnings, whether you are taking on your first employee or your fiftieth, you are likely to be able to claim.

However…

  • Not all employers can claim – there are exceptions. Employers of domestic workers such as gardeners or nannies are not eligible and neither are businesses that work more than 50% in the public sector.
  • As the name of the initiative suggests, the allowance is only for employers. This means that sole traders or traders in partnership who don’t employ staff can not claim the employment allowance because the business wouldn’t be  paying employer’s NI.
  • There’s a payback clause. This means that if you become no longer eligible for the employment allowance part way through the tax year, you have to pay back all that you have claimed throughout the year.

In spite of these drawbacks, we believe that the advantages of the Employment Allowance far outshine the disadvantages. However, if you’re still unsure about what the allowance will mean for you and your company finances, contact MCC Accountants. We can help you make the most of this government scheme, talk you through the most effective way to spend your allowance.  Give us a call on 0161 707 1500 or use our online contact form.

Posted in

Leave a Comment





This site uses Akismet to reduce spam. Learn how your comment data is processed.