Use it or lose it
The employment allowance is worth up to £2,000 per tax year for each employer, but any unused amount can’t be carried forward to another tax year. So it’s a case of use or lose the allowance for 2014/15.
The employment allowance can only be set against employer’s class 1 NIC due for the tax year, not against any other tax or charge. But that is not the impression you get when you read the GOV.UK page on the topic.
The confusion spread by the Government can be explained by comparing two companies which have one employee each:
Micro Ltd pays its employee £10,000, so has a total liability for employer’s NIC of £282 for 2014/15. Micro will use £282 of its £2,000 employment allowance entitlement. Micro Ltd can’t claim a tax refund in respect of the unused allowance of £1718.
Smee Ltd pays its employee £26,500, so has to pay employer’s class 1 NIC of about £213 per month. But Smee forgot to claim the employment allowance until month 10. The employer’s class 1 NI for months 10 to 12 (£639) will be covered by the employment allowance.
Also Smee will have already paid class 1 NIC of £1917 for months 1 to 9. If Smee asks HMRC, £1391 of the NIC already paid (£2000 – £639) can be refunded. Alternatively that refund can be set against other amounts of PAYE that Smee Ltd owes for 2014/15.
We can help you claim the employment allowance, and make sure any refund due is used in the most tax-efficient fashion.