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Set up or renew Employment Allowance in QuickBooks Online Payroll

You can reduce your Employer Class 1 National Insurance by £4,000 for the tax year if you qualify for Employment Allowance. This allowance lowers your Employer Class 1 National Insurance each time you run payroll. You can claim it until the full £4,000 has been claimed or until the end of the tax year.

You need to inform HMRC that you qualify for Employment Allowance. If you set the Employment Allowance option in QuickBooks Online to indicate that you qualify, we flag this and prompt you to submit your status to HMRC as an EPS filing.

For each new tax year you need to inform HMRC of your status (that is, if you renew or can no longer claim the Employment Allowance) through the EPS, as and when this occurs.

HMRC calculates your tax liability based on whether you qualify or not.

  • You qualify if you’re an employer running a business, charity or community sports club, and you have employees and pay Employers Class 1 NICs
  • You do not qualify if you are the director and you’re the only employee in your company
  • You do not qualify for domestic or household staff (unless they’re caregivers)

For more details on Employment Allowance, see Eligibility for Employment Allowance: further employer guidance on the GOV.UK website.

  1. Set your option for Employment Allowance.
    1. During setup (from the Employees or Payroll menu > Set up your payroll), select Start next to Claim Employment Allowance credit.
    2. After setup, go to the Payroll settings page (from the Gear icon > Account and settings or Company Settings > Payroll).
  2. Select Yes for Does your business qualify for Employment Allowance.
    If you select Yes, we generate an EPS filing and state that you’re eligible in the Employment Allowance Indication. You will be prompted to submit this EPS filing. If you have already informed HMRC that you qualify, you can choose to not send the EPS filing. However, there is no penalty or negative consequence for communicating your qualification status again through an EPS filing even if you have already communicated this to HMRC.
  3. If you select Yes, you need to inform us of the amount you have already used this tax year from the £4,000 annual allowance. You can find this information either on an Employment Payment record (P32) or by signing into your HMRC dashboard.
  4. Save your changes.

 

See also

Submit EPS to HMRC in QuickBooks Online Payroll
Employees and payroll

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