• 01 Jun 2016

More good news for small businesses: the employment allowance has been increased to £3,000 per year. This allowance can be set against the employer’s Class 1 NIC payable on employees’ and directors’ pay.

The bad news is that the employment allowance is no longer available to companies where the only employee in the year is a director of that company. To break this ‘one employee’ condition you may decide to employ a family member for a few hours.

The second employee doesn’t have to be a director of the company. However, the HMRC guidance for one person companies specifies that the second employee must be paid above the NIC secondary threshold (£156 per week for 2016-17).

However, the regulations don’t mention a minimum employment period or a minimum level of income. HMRC have read far more into the regulations than is in the law and as a result they’re imposing conditions by guidance rather than by regulation.

If your company wants to continue to qualify for the employment allowance in 2016-17 the only requirement it has to meet is that it has two or more paid earners for at least one period in the tax year (which may be as short as a week).

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