Employment allowance allows eligible employers to reduce their Class 1 National Insurance liability by up to £5,000 in a tax year, subject to de minimus state aid limits applicable to your business.
You can claim Employment Allowance if you are a business or charity and your employers Class 1 National Insurance liability was less than £100,000 in the last tax year. Groups of companies can only claim one Employment Allowance between them and you cannot claim Employment Allowance if the only employee of a limited company is a Director.
If you do your payroll in Xero, and you are eligible, you will need to claim the Employment Allowance as it is not an automatic deduction – this is the case even if you have claimed Employment Allowance in previous tax years.
To claim this, go the Payroll tab, then payroll settings. Go to the HMRC tab and put a tick in the “Yes, claim for 2024/25”
At this point if you have not already claimed for 2023/24 please do not tick the box for 2023/24 as you will need to revert all your payruns and redo them all to claim the employment allowance for 2022/24 – instead get in touch with us to correct this for you.
Once you have ticked the box to claim for 2024/25 Xero will ask you what industry you are in; click the option that applies to your business (for most businesses this will be “Other”), then click Done, and then Save at the bottom.
You will now be ready to claim Employment Allowance from your first payrun for 2024/25 in Xero.
If you have any queries as to your eligibility to claim Employment Allowance, or claiming Employment Allowance in Xero please contact 01228 534371 or advice@saint.co.uk
Michelle Ruddick
Senior Manager & Xero Champion
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