More good news for small businesses: the employment allowance has been increased to £3,000 per year. This allowance can be set against the employer’s Class 1 NIC payable on employees’ and directors’ pay.
The bad news is that the employment allowance is no longer available to companies where the only employee in the year is a director of that company. To break this ‘one employee’ condition you may decide to employ a family member for a few hours.
The second employee doesn’t have to be a director of the company. However, the HMRC guidance for one-person companies specifies that the second employee must be paid above the NIC secondary threshold (£156 per week for 2016-17).
However, the regulations don’t mention a minimum employment period or a minimum level of income. HMRC have read far more into the regulations than is in the law and as a result they’re imposing conditions by guidance rather than by regulation.
If your company wants to continue to qualify for the employment allowance in 2016-17 the only requirement it has to meet is that it has two or more paid earners for at least one period in the tax year (which may as short as a week).
