Deemed employment and Employment allowance

Starting from the tax year 2020, the Employment Allowance was increased from £3,000 to £4,000 and employers with their annual NI liability less than £100,000 could claim the allowance to offset their employer NI contributions for this amount.

However, with the newly established off-payroll rules that have commenced in April 2021, NI payments made for deemed employment should not be taken into consideration when claiming EA. In addition to this, the deemed employment NI liabilities are also not taken into account when calculating the eligibility threshold of £100,000.

Employers eligible to claim EA and who are processing deemed employment payments for those who fall within the off-payroll working rules need to keep separate records for NI contributions regarding off-payroll and their main NICs as they will need to inform HMRC on this and adjust their EA claim.

To learn more about Employment Allowance, visit the HMRC webpage.

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