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Employment Allowance Changes from April 2025: What UK Employers Need to Know

Employment Allowance Changes from April 2025: What UK Employers Need to Know

Effective from 6 April 2025, significant changes to the Employment Allowance (EA) have been introduced, impacting how UK businesses manage their National Insurance contributions (NICs). This guide outlines the key updates and their implications for employers.​

Key Changes to Employment Allowance

1. Increase in Employment Allowance Limit

The maximum EA claim has doubled from £5,000 to £10,500 per tax year. This enhancement aims to provide greater relief to eligible employers by reducing their annual employer Class 1 NICs liability. ​

2. Removal of the £100,000 NICs Threshold

Previously, employers with a secondary Class 1 NICs liability of £100,000 or more in the prior tax year were ineligible for EA. This threshold has been abolished, allowing more businesses to benefit from the allowance regardless of their prior NICs liabilities. ​

3. Cessation of State Aid Considerations

With the removal of the £100,000 threshold, EA no longer counts as de minimis state aid. Employers are no longer required to consider state aid limits when claiming EA. ​

Impact on Employers

These changes are particularly beneficial for small and medium-sized enterprises (SMEs), as they can now claim a higher allowance without the previous restrictions. However, it's essential to note that EA can only be claimed against one PAYE scheme per employer. ​

Eligibility Criteria

To claim the updated EA:

  • Eligible Entities: Businesses, charities (including community amateur sports clubs), and individuals employing care or support workers.

  • Ineligible Entities:

    • Public authorities (unless they have charitable status).

    • Employers whose work is mainly of a public nature (e.g., NHS services), unless they are charities.

    • Companies with only one employee who is also the director.

How to Claim

Employers can claim EA through their payroll software by indicating their eligibility in the Employment Payment Summary (EPS) submitted to HMRC. It's crucial to ensure accurate reporting to avoid potential compliance issues. ​

Additional Considerations

  • Connected Companies: If multiple companies are connected, only one can claim EA in a tax year.

  • Care and Support Workers: Individuals employing care or support workers may be eligible for EA, provided certain conditions are met. ​

Conclusion

The 2025 updates to the Employment Allowance present an opportunity for many UK employers to reduce their NICs liabilities significantly. By understanding the new provisions and ensuring compliance with HMRC guidelines, businesses can effectively leverage these changes for financial benefit.​

For personalized advice or assistance with claiming the Employment Allowance, feel free to contact our team at FilingsCorner.co.uk.

Note: This blog post is for informational purposes only and does not constitute financial or legal advice. Employers should consult with a professional advisor to understand how these changes apply to their specific circumstances.

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