Employment Allowance Update

07-May-2015 Employment Allowance
Much to the surprise of some small employers the employment allowance continues to be available in 2015/16 to set against employer's class 1 NIC. However, this generous tax rebate worth up to £2,000 per employer may not survive past the General Election, so make the most of it.
 
If the employer claimed the employment allowance in 2014/15, no further action is required in 2015/16 as the claim should be automatically carried forward. However, check your payroll software has implemented the allowance for 2015/16 as some software has not.
 
People who employ care-workers in their own homes can claim the employment allowance for 2015/16. The allowance wasn't available for such employers in 2014/15 due to the general block on using it against class 1 NIC on the pay of domestic workers.   
 
There may be a problem with the HMRC free software: Basic PAYE Tools, when reporting NIC on director's pay. If the annual earnings period is operated for the director, there may be a refund of tax and NI in month 12 when the director started to receive pay part way through the year. The PAYE Basic Tools package is ignoring the month 12 refund when calculating how much employment allowance to use, so overstating the set-off. Check the settings in the Basic PAYE Tools software, and pay the correct amount of NIC. 

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