Employment Allowance can reduce the amount of Class 1 National Insurance that employers have to pay by up to £3,000 per year. John Thompson, CEO of the Association of Plumbing & Heating Contractors (APHC), explains more.
Most plumbing and heating employers should be able to claim the government’s Employment Allowance, assuming they are paying employers’ Class 1 National Insurance on salaries above the secondary National Insurance Contribution threshold, which is currently £8,424 per year (2018/19).
You can't claim the Allowance if you're the director and sole employee of a limited company. Self-employed plumbers and heating engineers, i.e. those who don't operate via a limited company, are also ineligible to claim against any profits they draw down personally, as they pay Class 2 and Class 4 National Insurance Contributions. However, they can claim if they have employees and make Class 1 National Insurance Contributions on employee salaries.
For those who are eligible, the Allowance itself is claimed each month via the payroll process. Zero employers’ Class 1 National Insurance Contributions are payable until the company’s £3,000 allowance has been used up.
You can claim at any time in the tax year. If you claim late and don’t use your Allowance, you can ask HMRC to either use any unclaimed allowance at the end of the year to pay any tax or National Insurance owed including VAT and Corporation Tax if nothing is owed on your PAYE bill. Or you can request a refund from HMRC after the end of the tax year if you don’t owe anything.
If you haven’t claimed in previous tax years, you can claim £2,000 for each previous tax year dating back to 2014/15.
Importantly, you will only benefit from this Allowance if you pay yourself and your employees high enough salaries on which to incur and claim back Employers’ National Insurance Contributions – i.e. salaries over the secondary National Insurance Contributions threshold of £8,424 per year (2018/19).
There are certain restrictions surrounding eligibility, so it is advisable to take guidance from a professional accountant.
0121 711 5030
