Guidance on payroll information to report to HMRC updated to include changes to the Employment Allowance for tax year 2020-2021

14 April 2020

The Gov.UK page that advises what payroll information needs to be reported to HMRC via the Full Payment Submission (FPS) and Employer Payment Summary (EPS) has been updated to reflect the changes to the Employment Allowance that came into effect from 6 April 2020.

Amendments have been made to the Employment Allowance from tax year 2020-2021 which mean that employers will now be able to claim up to £4,000 a year off their National Insurance (NI) contributions, as opposed to the previous maximum of £3,000.

The number of employers eligible to claim will be impacted as, from 6 April 2020, businesses and charities may only claim if their employers’ Class 1 NI liabilities were below £100,000 in the previous tax year.

Due to the new restrictions, Employment Allowance now counts towards the total amount of de minimis state aid that businesses are entitled to receive over a three-year period. Employers must ensure that by receiving the Employment Allowance they do not exceed the de minimis state aid threshold for their sector.

The guidance confirms that another change to the Employment Allowance relates to how it is claimed via payroll software. Originally, where employers were entitled to the Employment Allowance, their claim would automatically renew each tax year, but from 6 April 2020, employers will need to make a new claim each tax year. This requirement is reiterated in the Guidance on RTI Data Items from April 2020.

Employers must now check that they meet the eligibility requirements on an annual basis and select ‘Yes’ to claim the allowance against the Employment Allowance indicator within the EPS each year. ‘No’ only needs to be selected where employers are ineligible to claim. In situations where the full allowance entitlement of £4,000 has been reached, there is no requirement to select ‘No’.


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