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Employment allowance

If you're eligible to claim employment allowance, you can easily notify HMRC that you're claiming it and keep track of how much you've claimed.

If you're unsure if you're eligible, you should check HMRC's guidance. If you’re part of a group, only one company or charity in the group can claim the allowance.

If you forgot to claim employment allowance in a previous tax year, you may be able to use any unclaimed allowance against any outstanding payments.

From April 2020, HMRC are introducing new rules and processes for claiming employment allowance. For more information on this, check our employment allowance changes guide.

 

Set up employment allowance for the 2019/20 tax year

  1. On the Company navigation bar, click Settings.
  2. Select the Eligible for Employment Allowance check box.
  3. Click Yes then click Continue.
  4. Click Submit then click Submit.
  5. This EPS only contains the employment allowance indicator, it doesn't contain any payment values, so you can submit it at any time.

  6. Click Close then click OK.
  7. As long as you notify HMRC that you're claiming the allowance, you don't need to report how much you're claiming, each month.

Set up employment allowance for the 2020/21 tax year

To set up the employment allowance for the 2020/21 tax year, you must have installed Sage 50cloud Payroll v26.00 and your process date needs to be on or after 06/04/2020.

  1. On the Company navigation bar, click Settings.
  2. Click the Apply for EA button.
  3. From the State Aid drop-down menu, select one of the following options:
    • Applicable
    • Not Applicable

    If State Aid is applicable, select the relevant State Aid Sector.

    For further advice on State Aid and if it's applicable to your company or not, contact HMRC.

  4. Click Submit then click Continue.
  5. Click Submit then click Submit.
  6. An employer payment summary (EPS) is sent to HMRC with the employment allowance application. If your application is successful, HMRC will confirm this in writing. If your application is unsuccessful, you'll receive a notification within your IR Secure Mailbox within five working days. Once you've had confirmation from HMRC that your application has been approved, you can select the Eligible for Employment Allowance check box with the company settings.

    You need to follow this process at the start of every tax year.

Claim your employment allowance

The employment allowance value for the tax month appears in box 5 on the P32 - Employer Payment Record:

  1. Click Reports then click Period End.
  2. Click Form P32 - Employer Payment Record.
  3. Click Preview.
  4. In the Criteria Values, enter the required tax month.
  5. The P32 should be ran for an individual tax month. If you run it for a range of tax months, the employment allowance values for previous tax months are cleared.

  6. Click OK.
  7. In box 5, check the Employment Allowance value.

Keep track of employment allowance

When you run the P32 - Employer Payment Record, the employment allowance value for the tax month is recorded in HMRC Payments in Company Settings:

  1. On the Company navigation bar, click Settings.
  2. Click the HMRC Payments tab.
  3. Check the employment allowance for the tax month.

If you use Collector of Taxes to pay HMRC, the amount of employment allowance you claim for the period appears in the wizard.

The employment allowance automatically stops calculating when you reach the annual allowance for the relevant tax year. If at any point during the tax year you become no longer eligible for employment allowance, you must pay back whatever you've claimed. If this happens, for further information please speak to HMRC.

Post employment allowance in Sage Accounts

If you use the Nominal Link option to post your salary journals to Sage Accounts, the employment allowance value isn't included. To reconcile your accounts, you need to create a manual journal to reduce the total NI on your balance sheet nominal code. Read more >