Spring statement 2022: What is Employment Allowance? Who's eligible and how much you can claim from April 2022

After Chancellor Rishi Sunak revealed a hike to the National Insurance threshold in the Spring Statement 2022, here’s how UK businesses can claim Employment Allowance

Spring statement 2022: What is employment allowance? Who's eligible and how much you can claim from April 2022 (Image credit: Getty Images via Canva Pro)
Spring statement 2022: What is employment allowance? Who's eligible and how much you can claim from April 2022 (Image credit: Getty Images via Canva Pro)

The Spring Statement, often known as a ‘mini Budget’, saw the Chancellor brandish new measures to help British households cope with the cost of living crisis.

Following pressure from charities, experts and opposition MPs, Rishi Sunak revealed a fuel duty cut, national insurance threshold increase and a boost to employment allowance for UK families and businesses.

But while raising the national insurance threshold has been welcomed as a “good call” experts such as by Martin Lewis in helping families and lower paid earners to afford the rising cost of food, fuel and energy, the move has unsettled business owners facing increased national insurance contribution costs.

Here’s what you need to know about the Employment Allowance, who’s eligible for it and how much it’s rising by in April 2022.

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What is Employment Allowance?

Employment Allowance is a UK Government provision which allows smaller employers and charities to reduce their national insurance contributions (NICs) by up to £4,000 per year.

In line with national insurance requirements, employers are responsible for deducting employees' national insurance payments from their earnings.

Employment Allowance allows employers to pay less employee Class 1 National Insurance per payroll, with the allowance coming to an end once it has run out or the tax year has concluded.

Eligible employers can claim up to £4,000 of their national insurance liability a year.

Who is eligible for Employment Allowance?

Employment Allowance is available to businesses and charities who paid less than £100,000 in Class 1 National Insurance liability during the previous tax year.

It is also open to employers of support and care workers, as well as those who are part of a group of companies or charities – with the allowance only available to the latter if the group’s combined NI liability is less than £100,000.

All eligible businesses and charities able to claim Employment Allowance back for the last four tax years.

How much is Employment Allowance rising by from April 2022?

The looming 1.25% increase to national insurance has concerned British citizens and businesses alike, with the primary threshold for national insurance set to rise to 13.25% in April 2022.

Rishi Sunak’s Spring Statement saw the Chancellor ease fears over the national insurance hike with an increase to the threshold for payments and a likewise increase to the Employment Allowance.

From April 2022, Employment Allowance will rise to £5,000 – giving a £1,000 boost to the amount available to eligible employers as a buffer for national insurance payments.

Speaking in the House of Commons on Wednesday, Mr Sunak said: “Today, I'm going further from April employment allowance will increase to 5000 pounds.

"That's a new tax cut up to 8000 pounds for home a million small businesses starting in just two weeks.”

The increase comes after business representative bodies such as the Federation of Small Businesses (FSB) called on the UK Government to raise the Employment Allowance to help businesses cope with the higher national insurance cost.

Andrew McRae, the FSB’s policy chair, said: “The Chancellor’s measures today will buy Scotland’s small businesses an inch of breathing space.

“Taking action to increase the employment allowance, as FSB suggested, will help local and independent businesses absorb some of the increasing costs of sustaining jobs.

"And by reducing fuel duty, the UK Government is helping every small business reliant upon their vehicle for their livelihood, like the rural tour guide that drives a minibus or the plumber who transports their tools in their van.”

To make an Employment Allowance claim and find out more, visit https://www.gov.uk/claim-employment-allowance.

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