Press release: NI Employment Allowance increased for employers but Government moves to end potential abuse by sole directors

The Employment Allowance was first introduced in 2014 and currently allows employers to reduce their Employer National Insurance bill by up to £2,000 a year¹. From next year, this will increase to relief of up to £3,000 per year, depending on how much a business pays in national insurance².

Natalie Miller, President of the ATT, commented:



“The Government’s commitment to increasing and extending this allowance is welcome news and will provide a boost to businesses seeking to alleviate what can be a significant cost involved when taking on an employee. This is a positive contribution to the UK’s economic recovery.

“There has been concern voiced over the abuse of the Employment Allowance through the use of various schemes, which HMRC is working to combat. The Government now intends to prevent businesses whose only employee is the sole director from claiming this allowance from 6 April 2016. The policy behind the Employment Allowance has always been to encourage and support businesses in recruiting staff, and not to help individuals to subsidise their own personal tax liabilities, so we think this is a fair move.

“Despite these concerns, this announcement proves that HMRC and the Government are still keen to develop the positive outcomes that arise from this allowance.

“The increase to the allowance will also assist employers when the new National Living Wage becomes compulsory as this would be likely to increase employers’ costs otherwise. The increase in the Employment Allowance ought to now make the situation tax neutral and not deter any employer from recruiting the same amount of staff as under the current National Minimum Wage."

Notes for editors

1. Secondary Class 1.

2. This announcement follows the recent extension of the relief to employers of care and support workers from 6 April 2015, as they were not included when the allowance was initially launched.

Technical Team