Changes to Employment Allowance 2021/22

Following our latest update on Changes to National Minimum Wage for the 2021/22 tax year, another update that is being implemented for the upcoming tax year is an increase to the employment allowance. The previous year’s allowance of £4,000 will continue to be the rate for all eligible employers.

The reform of how employment allowance is assessed that came into place last year will remain for the upcoming year. That means employers will once again have no obligation to submit information about other state aid they currently receive. The other key change that came into effect meant that in the future should a company wish to claim their employment allowance, it will have to be done on a year-by-year basis instead of the previous setup which allowed businesses to carry it forward from one tax year to the following.

In order to assess the claim of the employer allowance for those businesses connected to others, they will be required to cumulate all of their secondary Class 1 NIC liabilities incurred from the previous tax year, which means if the total sum meets or exceeds the £100,000 line – neither business will be eligible to claim.

If you have more than one employer PAYE reference on the payroll, the total employers’ class 1 NI liabilities for the payrolls must be less than £100,000 combined from the previous tax year, similar to the connected companies rule.

Employees who are classed as “off-payroll workers” should not be included in the calculations as these are known as “deemed payments”. These do not count towards the £100,000 threshold.

Employment allowance will once again count towards the state aid each company is eligible to receive within the tax year.

You can find out more about the changes on the government website for Employment Allowance in 2021/22 or find further detail about state aid available to businesses.