The Employment Allowance (EA) is a £5,000 allowance set against employer National Insurance Contributions (NICs) and must be claimed each tax year by qualifying employers. The EA was increased from £4,000 to £5,000 this tax year to help soften the blow of the 1.25% increase in employer contributions, which is now calculated at 15.05%.

If two or more companies or charities are connected, then only one of them may claim the EA.

Employers are not eligible to claim the EA where their employers’ Class 1 National Insurance liabilities in the previous tax year exceeded £100,000.

Another important exclusion from the EA is single director companies where the director is the sole employee of the company.