In the Spring Statement in March, Chancellor Rishi Sunak introduced several new measures to help the public combat the current cost-of-living crisis. One of these measures was the boost to Employment Allowance for UK families and businesses.

What is Employment Allowance?

Employment Allowance is a government provision which allows smaller employers and charities to reduce their national insurance contributions (NICs) by up to £4,000 per year.

In line with National Insurance requirements, employers are responsible for deducting employees’ NIC payments from their earnings.

Employment Allowance allows employers to pay less employee Class 1 National Insurance per payroll, with the allowance ending once it has run out or the tax year has concluded.

Employers who are eligible to claim can can receive up to £4,000 of their National Insurance liability per year.

Who is eligible?

All businesses, charities and community amateur sports clubs eligible for the Employment Allowance, whose secondary Class 1 National Insurance Contributions (NICs) liabilities, and additionally from the 2023 to 2024 tax year onwards Health and Social Care Levy liabilities, are over £4,000 a year, will be eligible for the scheme.

How much is the Allowance rising?

The increase to National Insurance has concerned British people and businesses alike, as the primary threshold rose to 13.25% in April 2022.

From April 2022, Employment Allowance has risen to £5,000 – giving a £1,000 boost to the amount available to eligible employers as a buffer for National Insurance payments.

The increase comes after business representative bodies such as the Federation of Small Businesses (FSB) called on the UK Government to raise the Employment Allowance to help businesses cope with the higher national insurance cost.

Around 495,000 businesses will benefit from this increase, including around 50,000 businesses which will be taken out of paying NICs and the Health and Social Care Levy.

This is in addition to the 620,000 businesses who already do not pay NICs due to the current level of the Employment Allowance.

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