Employment Allowance will potentially increase from £3,000 to £4,000

10 March 2020

Following on from pledges made in the Conservative Manifesto, speculation is rife that Rishi Sunak will announce a boost of £1,000 for employers who are eligible to claim the Employment Allowance (EA), raising the figure that can be reclaimed from £3,000 per year to £4,000, at the budget.

The costings document that accompanied the manifesto confirmed these plans and it is highly likely that the changes will come to fruition. It is thought that this move has been planned to alleviate some of the pressure associated with the inflation-busting increase to the National Minimum Wage (NMW) and National Living Wage (NLW), which some smaller businesses have voiced their concerns over.

The GOV.UK pages which relate to the changes to the Employment Allowance from 6 April 2020 advise that current guidance on how EA works will be updated in April 2020, possibly to allow time to accommodate any amendments to the figure that can be reclaimed.

It has already been confirmed that the Employment Allowance will be restricted to employers with total secondary Class 1 National Insurance Contributions liabilities of less than £100,000 in the tax year prior to the claim.

Due to the new restrictive changes, Employment Allowance will operate as de minimis state aid, so the allowance figure will contribute to the maximum amount of state aid that a company can receive. There are different de minimis state aid ceilings according to which sector a business operates in, and the potential planned increase to Employment Allowance from £3,000 to £4,000 will raise questions for payroll professionals, as it means that more businesses are more likely to breach the de minimis state aid ceiling when considering £4,000 instead of £3,000.


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