To Inform HMRC that the Employment Allowance will be claimed

The Employment Allowance is currently claimed by employers to reduce their employers secondary Class 1 NICs bill by up to £4,000.

From 6 April 2020, extra checks are needed to ascertain eligibility. Employers can claim the allowance if their secondary Class 1 NICs liability was less than £100,000 in the prior tax year. Employers whose secondary Class 1 NICs liability was £100,000 or more will not be eligible to claim the allowance.

Because of the change, the Employment Allowance is considered to be a type of de minimis State aid because it advantages some businesses over others, which could potentially distort competition and trade within the European Union. This will not apply if the business does not engage in economic activity by putting goods or services on the market.

Businesses must ensure that the £4,000 allowance when added to other de minimis State aid received or allocated in the claim year plus the previous two tax years does not exceed the de minimis State aid threshold for the trade sector.

Employers need to reapply for the de minimis State aid Employment Allowance at the start of each tax year.

HMRC will be responsible for ensuring compliance with the de minimis State aid rules.

Companies where the director is the sole employee cannot claim the employment allowance.

Follow these steps when you are ready to send your Employer Payment Summary to HMRC for the tax month or quarter.

  1. Open the Payroll folder and then click RTI Submissions or click the Payroll & HR tab on the Ribbon Bar and then click Payroll - RTI Submissions.

  2. Click Employer Payment Summary.

  3. Complete page one as normal and click Next.

  4. On page two under Employment Allowance for 2020/21 select the Starting to claim or already claiming for 2020/21 option. When the Employer Payment Summary is submitted this signifies to HMRC that the allowance will be claimed.

  5. Click Start to submit the Employer Payment Summary.


- You only need to signify to HMRC once that you will be claiming the Employment Allowance, not each time you submit an Employer Payment Summary.

- You can claim the full allowance in a single month if your employer's NICs due exceeds the limit. You should enter the amount claimed for each month on the P32 Processing - Employment Allowance form.

- When you pay Income Tax and employer's and employees' National Insurance contributions to HMRC you must adjust your payment by the amount of the Employment Allowance you are claiming.