Impact of Starting to Claim Employment Allowance Mid-Year
If you begin claiming Employment Allowance part way through the tax year, it affects your PAYE (Pay As You Earn) bill in the following ways:
- Proportional Reduction: The allowance applies only from the month you start claiming onwards. For example, if you start in Period 7, the allowance will cover Periods 7-12.
- Cumulative Claims: You can still utilize the full £5,000 allowance within the tax year, but only the periods after you start claiming will directly reduce your NI contributions.
In this scenario:
- Periods 1-5: No NI contributions and no EA claimed.
- Period 6: £1,000 NI contributions but no EA claimed, since claiming was off.
- Periods 7-12: £3,000 NI contributions are reduced by £3,000 EA.
- Remaining EA: £2,000 at year-end.
If you have unused Employment Allowance by the end of the tax year, you have two options:
Offset Against Other Taxes:
- HMRC can apply the remaining allowance to other tax liabilities you owe, such as VAT or Corporation Tax, provided you have outstanding amounts in these areas.
Request a Refund:
- If you do not owe any other taxes, you can request HMRC to refund the unused Employment Allowance. This can be done through your HMRC online account or by contacting HMRC directly.
For further assistance, please contact our support team or refer to the HMRC Employment Allowance guidance.
- Proportional Reduction: The allowance applies only from the month you start claiming onwards. For example, if you start in Period 7, the allowance will cover Periods 7-12.
- Cumulative Claims: You can still utilize the full £5,000 allowance within the tax year, but only the periods after you start claiming will directly reduce your NI contributions.
Example Scenario
| Period | Employer NI (£) | EA Claimed (£) | Remaining EA (£) |
|---|---|---|---|
| 1-5 | 0 | 0 | 5,000 |
| 6 | 1,000 | 0 | 5,000 |
| 7-12 | 3,000 | 3,000 | 2,000 |
| Total | 4,000 | 3,000 | 2,000 |
In this scenario:
- Periods 1-5: No NI contributions and no EA claimed.
- Period 6: £1,000 NI contributions but no EA claimed, since claiming was off.
- Periods 7-12: £3,000 NI contributions are reduced by £3,000 EA.
- Remaining EA: £2,000 at year-end.
Options for Unused Allowance at Year-End
If you have unused Employment Allowance by the end of the tax year, you have two options:
Offset Against Other Taxes:
- HMRC can apply the remaining allowance to other tax liabilities you owe, such as VAT or Corporation Tax, provided you have outstanding amounts in these areas.
Request a Refund:
- If you do not owe any other taxes, you can request HMRC to refund the unused Employment Allowance. This can be done through your HMRC online account or by contacting HMRC directly.
For further assistance, please contact our support team or refer to the HMRC Employment Allowance guidance.
Updated on: 27/10/2024
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