Employment Allowance (P32 Processing)

Use this form to enter the Employment Allowance you want to claim for each tax period. The employer NICs payment due for each tax month is displayed on the form alongside a box where the amount of allowance claimed for each tax month can be entered.

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.

The Employer Payment Summary (EPS) is used to claim the Employment Allowance.

One of these options on the EPS screen in Payroll must be selected:

Can't claim
Stop claiming
Starting to claim or already claiming for 2021-22.

The trade sector that the de minimis State aid applies to must also be selected (Industrial, Road Transport, Agriculture, Fisheries and aquaculture).

Trade sectors have different de minimis State aid thresholds. An employer can only claim the Employment Allowance if they have at least £4,000 of their de minimis State aid limit for their trade sector remaining. HMRC will offset the allowance claimed against the Employer Class 1 NICs due. Employers must reduce their payment by the amount of allowance they are claiming.

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

The State aid rules don't apply option must be selected if state aid rules are not relevant to the business.

Amount Claimed

Box	Description
ER NIC	The employer's NI due to HMRC for the tax month.
Amount Claimed	The allowance being claimed for the month or quarter, up to the annual limit. - If the P32 Payment Frequency option on the Payroll - Utilities - Set Options form is set as 'Quarterly' you can enter the allowance for months 3, 6, 9 and 12. - The limit is recorded in the Employment Allowance Limit box on the NI ER's tab of the Payroll - Utilities - PAYE/NI/Stat. Payments form.

This example assumes the employment allowance is set to £2000.00.

Your income tax and NI liability that is paid to HMRC is the same amount every month:

£290.35 Income Tax
£214.61 Employee NICs
£247.36 Employer NICs.

You claim £247.36 for the month from your £2000.00 Employment Allowance. You then claim the remainder of the allowance over the following seven months:

Month	Employee NICs Payment (£)	Allowance Claimed (£)
April	0.00	247.36
May	0.00	247.36
June	0.00	247.36
July	0.00	247.36
August	0.00	247.36
September	0.00	247.36
October	0.00	247.36
November	0.00	247.36
December	226.24	21.12
January	247.36	0.00
February	247.36	0.00
March	247.36	0.00

This example assumes the employment allowance is set to £2000.00.

Your income tax and NI liability which is paid to HMRC is the same amount every month:

£2660.00 Income Tax
£2030.00 Employee NICs
£2310.00 Employer NICs.

These are included in the Employer Payment Summary sent to HMRC each month. You claim all of your £2000.00 Employment Allowance in April.

Month	Employee NICs Payment (£)	Allowance claimed (£)
April	310.00	2000.00
May	2310.00	0.00
June	2310.00	0.00
July	2310.00	0.00
August	2310.00	0.00
September	2310.00	0.00
October	2310.00	0.00
November	2310.00	0.00
December	2310.00	0.00
January	2310.00	0.00
February	2310.00	0.00
March	2310.00	0.00

Employment Allowance (P32 Processing)

Amount Claimed

Memo