How to claim Employment Allowance 2022/23

Making a claim for Employment Allowance 2022/23 is an excellent way to boost your cash flow. This straightforward allowance for employers enables you to claim £5,000 against your employer Class 1 National Insurance (NI) costs. That’s a helping hand towards covering your payroll costs – and a means to invest money back into the organisation.

To qualify, your employers’ Class 1 NI liabilities for the previous tax year will need to be less than £100,000. And you’ll also need to meet HM Revenue & Customs’ (HMRC) strict eligibility rules. But with the right boxes ticked, your business, charity or amateur sports club is ready to make a claim and start maximising the benefits of this allowance.

In this article we’ll ask:

• How do you make a claim for Employment Allowance 2022/23 through your existing payroll software?
• How do you claim Employment Allowance 2022/23 using HMRC’s Basic PAYE Tools?
• Can you claim for previous tax years?

If you want to learn more about Employment Allowance, you can find everything you need to know here. We’ve also put together more detailed information about the eligibility criteria for the allowance here.

How do you make a claim for Employment Allowance 2022/23 through your payroll software?

The method for making an Employment Allowance claim will vary depending on the software you use to run your organisation’s payroll. You can either use an HMRC-recognised payroll software, or you can use HMRC’s free Basic PAYE Tools. We’ll start by looking at making a claim using your own choice of compatible payroll software:

1. Put ‘Yes’ in the ‘Employment Allowance indicator’ field
Do this next time you send an Employment Payment Summary (EPS) to HMRC. This tells HMRC that your organisation is ready to claim the allowance against any employers’ Class 1 NI contributions included in your next payroll run.

2. Select your business sector under ‘de minimis state aid rules’
This tells HMRC what industry or sector your organisation trades in. Your payroll software will apply the relevant de minimis state aid threshold for payments you receive. Once you exceed the state aid threshold for the current three-year period, you will no longer be eligible for Employment Allowance.

3. Select all business sectors that apply to your organisation
There are specific business sectors for agriculture, fisheries and transport. But most organisations will choose ‘Industrial/Other’ as their business sector. This gives you a de minimis state aid threshold of €200,000 for the period.

4. Select ‘State aid rules do not apply’ if relevant
If your organisation is a charity or amateur sports club, or if you employ a care worker, you won’t make or sell goods and services. If this reflects your trading status, you can tick the ‘State aid rules do not apply’ box to bypass the state aid threshold.

How do you claim Employment Allowance 2022/23 using HMRC’s Basic PAYE Tools?

If you’re not using one of the compatible payroll software packages on HMRC’s list, you can download the free Basic PAYE Tools software from the HMRC website.

The Basic PAYE Tools package is available for Windows, Mac and Linux platforms. Once downloaded, it gives your organisation a simple way to run payroll, share NI information and submit EPS or Earlier Year Update (EYU) to HMRC.

To make a claim for Employment Allowance through the Basic PAYE Tools software:

1. Select the correct name in the ‘Employer’ menu on the home page.
2. Select ‘Change employer details’.
3. Select ‘Yes’ in the ‘Employment Allowance indicator’ field.
4. If you sell goods or services, answer ‘Yes’ to the ‘Do state aid rules apply?’ question and then select the business sectors that apply to you. Otherwise, answer ‘No’ and select ‘State aid rules do not apply’.
5. Send your EPS as normal.

It’s a relatively straightforward way to make a claim. HMRC will apply the allowance until your claim reaches the relevant threshold for Employment Allowance or state aid.

Can you claim for previous tax years?

A successful claim for Employment Allowance in the 2022/23 tax year will help you reduce your payroll costs. And, importantly, eligible organisations can make retrospective claims for previous tax years too. That’s a potential saving of up to £19,000!

Retrospective claims can go back four years. So, if you’ve never claimed Employment Allowance before, there’s an opportunity to claim against your employer Class 1 NICs going back as far as the 2018/19 tax year.

In total, this means you may be eligible to claim:

• £3,000 for the 2018/2019 tax year
• £3,000 for the 2019/2020 tax year
• £4,000 for the 2020/2021 tax year
• £4,000 for the 2021/2022 tax year
• £5,000 for the 2022/2023 tax year

If you make a successful claim for all years, that potential £19,000 frees up cash that you can reinvest back into the growth of your organisation.

Note: During the 2018/19 and 2019/20 tax years, there was no limit on the employers’ Class 1 National Insurance liability, or how much de minimis state aid you could receive. If you make an Employment Allowance claim for 2018/19 or 2019/20, the thresholds for employers’ Class 1 National Insurance and de minimis state aid do not apply.

Part 4: everything you need to know

In the final instalment of this 4-part series, we’ll summarise all the information we’ve shared about Employment Allowance so far. Check back in for a complete guide that covers:

1. What Employment Allowance 2022/23 is
2. How to understand the eligibility rules
3. The key steps in a successful claim

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