If you’re unsure of your eligibility, read this guidance to help you decide if you can claim Employment Allowance as a single-director company.

1. Single-director companies not eligible for employment allowance

Limited companies cannot claim Employment Allowance if they have just one director and that director is the only employee liable for secondary Class 1 National Insurance.

This means that companies with several employees, where the director is the only employee paid above the Secondary Threshold, are not eligible for the Employment Allowance.

This only applies to limited companies. If you’re self-employed, this does not apply to you.

2. The additional employee test

If your company circumstances change and more than one employee or director earns above the Secondary Threshold, you’ll be eligible for Employment Allowance for the whole tax year.

This includes companies where:

• all employees are directors where both earn above the Secondary Threshold
• the company employs husband and wife directors where both earn above the Secondary Threshold
• the company employs seasonal workers where one or more is an employee earning above the Secondary Threshold in a week
• you’re the only UK based employee of an international company that meets the other eligibility criteria, and you earn above the Secondary Threshold in a week

The decisive factor is that the additional employees must be paid above the Secondary Threshold. 

Directors must be paid above the annual Secondary Threshold or pro-rata if the directorship began after the start of the tax year.

3. Changes in the year

If your company has several employees paid above the Secondary Threshold, but your circumstances change during the tax year and the director becomes the only employee paid above the Secondary Threshold, you can still claim the Employment Allowance for the tax year.

You should stop it for the following tax year, unless there are further changes to your circumstances and a further employee is taken on and paid above the Secondary Threshold.

4. Stopping your Employment Allowance claim

If your company is no longer eligible to claim the Employment Allowance at the start of the tax year, you should stop your claim.

Select ‘no’ in the ‘Employment Allowance indicator’ field within your payroll software, and submit an Employment Payment Summary (EPS) to HMRC.

You must ensure you pay the full amount of employer Class 1 National Insurance contributions, without deducting the Employment Allowance.

These changes will not affect any claims made in previous years.