Employment Allowance April 2025
More employers have taken an interest in Employment Allowance now it has once again been in the press. The eligibility criteria have changed several times since launch and are changing again next April. Employment Allowance is currently £5,000 and is used to offset against employer’s Class 1 National Insurance payments.
Many employers are able to claim the allowance but there are some notable exclusions. If an employer is a public body, or more than half of their work is in the public sector, they will not be eligible for the allowance. There is also a limit for de minis state aid that will effect some sectors; if an employer has received any state aid they will need to total the aid received with the Employment Allowance to make sure they are below the limit for their particular sector.
There are group rules for Employment Allowance which are also applied to Apprenticeship Levy. The group rules are not always straightforward but if an employer has more than one PAYE they need to check if the PAYEs should be grouped together or if can be kept separate. Only one company within a group can claim Employment Allowance.
There is currently a maximum threshold for eligibility; if an employer or group has total employer’s Class 1 National Insurance liabilities of greater than £100 000 they will not be eligible. It was announced in the 2024 Autumn Budget that this threshold will be removed.
The Employment Allowance for April 2025 is increasing to £12,500 and the £100,000 employer’s National Insurance threshold has been removed. This will help offset the increases in the National Insurance liability for very small companies and very small employers may even stop paying employer’s National Insurance altogether. Most employers will see their National Insurance bill increase despite the allowance changes.
PAYE = Pay as You Earn
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