Companies where the director is the sole employee are now no longer able to claim Employment Allowance.
Companies where the director is the sole employee
From April 2014, most businesses have been entitled to an annual ‘Employment Allowance’ of up to £2,000 to reduce their liability for Employers Class 1 NI, unless they have been carrying out more than 50% of their work in or for the public sector (time or turnover). Please note that supplying IT services for a government department or local council does not preclude a business from claiming the allowance.
The government announced an increase in the Employment Allowance to £3,000 a year from April 2016.
However, from April 2016, to ensure that the Employment Allowance is focused on businesses that support employment, companies where the director is the sole employee are no longer able to claim the Employment Allowance.
Companies where there is more than one employee but the director is the only employee paid above the Secondary Threshold (£8424 per annum in 2018/19) will also not be able to claim.
Companies with more than one employee
If you pay an additional employee above the Secondary Threshold (£162 per week in 2018/19), irrespective of the amount the director is paid, OR both of two directors are paid above the annual secondary threshold (£8424 or pro rata if the directorship began after the start of the tax year) you can claim the Employment Allowance (as long as you are otherwise eligible). If your company has employees paid above the Secondary Threshold, but circumstances change during the tax year and the director becomes the only employee paid above the Secondary Threshold, you can still claim the Employment Allowance for the tax year but will not be able to continue the claim into the next tax year.
View the HMRC guidance on Employment Allowance.