What is Employment Allowance? Eligibility for 2022/23 tax cut, claiming it, Spring Statement changes explained

The Chancellor altered the National Insurance tax relief in his mini-Budget
Watch more of our videos on Shots! 
and live on Freeview channel 276
Visit Shots! now

The Chancellor Rishi Sunak delivered his Spring Statement 2022 on Wednesday (24 March).

Essentially a mini-Budget, the speech coincided with the release of figures showing inflation has hit its highest level since 1992.

Hide Ad
Hide Ad

Mr Sunak sought to address the cost of living crisis with several measures - although opposition parties and campaigners said he did not go far enough.

One of these measures involved changing the Employment Allowance - a tax relief mechanism for small businesses.

So what exactly is this allowance - and how has it been changed?

Here’s what you need to know.

Rishi Sunak has announced tax relief for small businesses (image: PA)Rishi Sunak has announced tax relief for small businesses (image: PA)
Rishi Sunak has announced tax relief for small businesses (image: PA)

What is the Employment Allowance?

The Employment Allowance is a tax relief mechanism that’s designed to lessen the National Insurance contributions burden for small businesses, as well as charities and amateur community sports clubs.

Hide Ad
Hide Ad

It’s support you can also claim if you employ a carer or support worker.

The way it works is it provides a pot of money against which National Insurance Contributions (NICs) are lowered for employers throughout the tax year.

It continues to kick in until this pot of money is used up or the tax year ends.

Small businesses will be able to get £1,000 more in National Insurance relief (image: Adobe)Small businesses will be able to get £1,000 more in National Insurance relief (image: Adobe)
Small businesses will be able to get £1,000 more in National Insurance relief (image: Adobe)

Employers are eligible to claim it if they generated under £100,000 in Class 1 National Insurance Contributions (NICs) - i.e. those from employees who are earning more than £184 a week and are under state pension age - over the previous tax year.

Hide Ad
Hide Ad

The policy was first introduced under the Conservative-Liberal Democrat Coalition Government in 2014.

How has the Employment Allowance changed?

The amount of relief available has gradually risen since the Employment Allowance’s introduction.

Before Rishi Sunak’s Spring Statement 2022, the pot of relief sat at a maximum of £4,000 - up from £2,000 in 2014.

In his mini-Budget, the Chancellor announced the pot would grow to £5,000.

Hide Ad
Hide Ad

Mr Sunak said that roughly 495,000 businesses would benefit from this increase to the maximum relief pot, with this number including some 50,000 businesses he said would be taken out of paying NICs and the Health and Social Care Levy altogether.

The treasury estimates there are already 620,000 businesses who do not pay NICs due to the current level of the Employment Allowance.

This increased relief will kick in from Wednesday 6 April 2022 and will apply to the new tax year.

Employers do not need to do anything to receive the uplift as it will be applied through the mechanisms businesses already use to make NICs.

A message from the editor:

Hide Ad
Hide Ad

Thank you for reading. NationalWorld is a new national news brand, produced by a team of journalists, editors, video producers and designers who live and work across the UK. Find out more about who’s who in the team, and our editorial values. We want to start a community among our readers, so please follow us on Facebook, Twitter and Instagram, and keep the conversation going. You can also sign up to our email newsletters and get a curated selection of our best reads to your inbox every day.

Comment Guidelines

National World encourages reader discussion on our stories. User feedback, insights and back-and-forth exchanges add a rich layer of context to reporting. Please review our Community Guidelines before commenting.