Guidance

Employers of care and support workers and Employment Allowance: further employer guidance

Updated 15 February 2023

1. Change to the Employment Allowance

Since 6 April 2015, employers of care and support workers can claim the Employment Allowance. This means you can reduce your Employer National Insurance contributions bill by up to £3,000 in the tax years 2016 to 2020, £4,000 from 2020 to 2022 and £5,000 from 6 April 2022, depending on how much employer National Insurance contributions you pay.

The Employment Allowance is not a grant, it works by reducing the amount of employer National Insurance contributions you need to pay.

2. Employing a care and support worker

You can claim the Employment Allowance if:

• you’re an employer and you pay employer National Insurance contributions
• you employ a care and support worker and pay for this yourself from your own funds, either for yourself or another person — if for someone else, you do not need to be related to them or live with them
• you receive a direct payment for the care from the NHS or your local authority and you use this to employ care and support worker — this type of care worker is sometimes known as a personal assistant
• you’ve sustained an injury and need to employ a care and support worker for yourself until you recover
• you employ a care and support worker to look after your disabled child if the care is due to their disability
• your disability means that you need support so that you can care for your children

• the person you’re employing the care and support worker for, needs care because of their:

  • mental or physical disability
  • past or present dependence on alcohol or drugs
  • past or present illness
  • past or present mental disorder
  • long term health condition

You can only claim one Employment Allowance. The allowance is per employer, not per staff member. Each employer can reduce their employer National Insurance contributions bill by up to £5,000 from 6 April 2022, no matter how many staff they employ.

In addition, all of the duties of the care and support worker have to be in relation to the individual who needs care. You can claim the Employment Allowance for as long as the person needs care. The care and support worker cannot help out with others in the home who do not need care.

2.1 Duties of the care and support worker

The care and support worker can do anything that you need help with. This could be anything from personal care to general assistance round the house with cleaning, cooking and laundry, or help with financial administration such as tax credits.

The care can be provided anywhere, so you can employ a carer to support family or friends who do not live with you and claim the Employment Allowance. The care does not need to be provided in the home, so you can employ a carer to help at work, accompany you to day care or appointments and claim the Employment Allowance.

You cannot claim the Employment Allowance if you are employing a nanny unless the nanny is employed for an individual who needs care.

3. How to claim the Employment Allowance

3.1 File HMRC returns online

You’ll need to tick the box to confirm you’re eligible on your payroll software. Your payroll software will automatically apply the Employment Allowance and reduce your employer secondary Class 1 National Insurance contributions bill.

To claim through your payroll software, put ‘Yes’ in the ‘Employment Allowance indicator’ field next time you send an Employment Payment Summary (EPS) to HMRC.

If you use HMRC’s Basic PAYE Tools:

• select the correct name in the ‘Employer’ menu on the home page
• select ‘Change employer details’
• select ‘Yes’ in the ‘Employment Allowance indicator’ field
• input your business sector or choose ‘state aid rules do not apply’ if you business does not undertake economic activity
• send your EPS as normal

You only need to claim Employment Allowance once within a tax year.

If you stop being eligible, select ‘No’ in the ‘Employment Allowance indicator’ field in your payroll records. Not all payroll software can send EPS reports. If this is the case, you can use HMRC’s Basic PAYE Tools.

3.2 File HMRC returns on paper

To claim the Employment Allowance on paper, tick the box on form RT5 (Employment Payment Summary) where it asks whether you wish to claim the Employment Allowance. You’ll need to tick this box every time you send in an RT5. You will also need to subtract the value of the allowance from your employer National Insurance contributions liability before you make a payment.

You can either spread the allowance over the year or deduct it all in one go, if you have sufficient employer National Insurance contributions liability.

4. Possible situations

Situation	Can you claim the Employment Allowance?
I need to employ a carer because of a long term health condition.	Yes.
I receive direct payments to help with my care due to disability. I need to employ a personal assistant to support me.	Yes.
I was injured in a car crash and will need to employ a carer whilst I recover.	Yes, for as long as you are in need of care.
I want to employ a carer for my friend, who has fallen and broken their hip. My friend lives in another part of the country. Would they need to live with me to enable me to claim the Employment Allowance?	Yes, you can claim the Employment Allowance. The person who needs care does not have to live with you.
I want to employ a carer for my adult child, who has serious health issues and needs full time care. They do not live with me.	Yes.
I am a parent and employ a nanny or an au pair to look after my children.	No. To qualify for the allowance, you must be employing a care and support worker to support someone who needs care because of: — mental or physical disability — past or present dependence on alcohol or drugs — past or present illness — past or present mental disorder
I am a parent. I employ a carer to look after my disabled child.	Yes, if your child needs care due to their disability.
I am a disabled parent. I employ a nanny to look after my children.	Yes, if your disability means that you need support so that you can care for your children, you can claim the Employment Allowance.
I employ 2 carers. Can I have 2 Employment Allowances?	No. The Employment Allowance is per employer, not per staff member. Each employer can reduce their Employer National Insurance contributions bill by up to £3,000 for 2016 to 2020, £4,000 from 2020 to 2022 and £5,000 from 6 April 2022, irrespective of how many staff they employ.
In 2020 to 2021 I employed a part-time carer. I pay £1,000 Employer National Insurance contributions a year. I have only used £1,000 of the Employment Allowance but I know the Employment Allowance is for £4,000. Can I have the other £3,000 of the allowance that I have not used?	No. The Employment Allowance is not a cash grant, but an offset against your Employer National Insurance contributions bill of up to £4,000 a year. If you pay less than £4,000 a year in Employer National Insurance contributions, then your claim is capped at the total amount of Employer National Insurance contributions you pay. You will not receive a refund for any unused allowance.
I employ a carer to look after my elderly parents. Can I claim the Employment Allowance?	Yes. As long as both your parents need care because of: — mental or physical disability — past or present dependence on alcohol or drugs — past or present illness — past or present mental disorder. You can claim the allowance.