Employment Allowance is a UK government scheme that allows eligible employers to reduce their annual employer (secondary) Class 1 National Insurance Contributions (NICs) by up to £10,500 per tax year. The allowance is claimed via the Employer Payment Summary (EPS) submission to HM Revenue and Customs (HMRC).
Previously, the Third-Party Electronic Funds Transfer (EFT) listing used for HMRC payments did not include Employment Allowance as a line item. This has now been corrected — Employment Allowance will now appear in the Third-Party EFT output alongside other HMRC payment obligations, once the indicator is enabled.
Key facts
The table below displays key facts for Employment Allowance.
Item | Detail |
Value | Up to £10,500 per tax year (subject to change) |
Purpose | Reduces employer (secondary) Class 1 NICs only — does not affect employee NICs |
Claim method | Via EPS submission to HM Revenue & Customs |
Eligibility | Employer NICs below £100,000 in the prior tax year; must have at least one employee who is not a director |
Key exclusions | Single-director companies, most public sector bodies, certain IR35/off-payroll cases |
Operation | Offset applied automatically through payroll each period until the full £10,500 is used or the tax year ends |
Payment impact | Reduces the amount payable to HMRC; does not alter the NIC calculation itself |
Limits | Cannot create a refund; cannot be carried forward to the next tax year; must be re-claimed each tax year |
Prerequisites
Before configuring Employment Allowance within Third-Party EFT, confirm the following:
Your organisation is eligible for Employment Allowance (see key facts above).
Your employer NICs liability for the prior tax year was below £100,000.
You have submitted, or are planning to submit, an EPS to HMRC to claim Employment Allowance for the current tax year.
You have payroll administration access to the RTI settings in PeopleXD.
Configuration
Employment Allowance must be enabled per company using the Employment Allowance EFT indicator. This setting is located within the RTI configuration area of PeopleXD.
Click Settings then click General.
Click RTI then select Detail: Company Allowance.
For the relevant company, turn on the Employment Allowance EFT indicator.
Click Save.
📌Note: This configuration is company-specific. If you operate multiple payroll companies within PeopleXD, you must enable the indicator separately for each eligible company.
Menu reference
The Employment Allowance EFT indicator is part of the existing PAY3400. Maintain Statutory Pay Parameters screen. No new menu options are required.
Menu option | Reference |
Maintain Statutory Pay Parameters | PAY3400 |
Behaviour after enabling
Once the Employment Allowance EFT indicator is enabled:
Employment Allowance will appear as a line item in the Third-Party EFT listing generated for HMRC payments.
The allowance offset is applied automatically each pay period until the full annual entitlement is reached or the tax year ends.
The allowance reduces the net amount payable to HMRC via EFT — it does not change the underlying NIC calculation for individual employees.
No refund is generated if the allowance exceeds the employer NIC liability in a given period; the offset simply reduces to zero.
Frequently asked questions
What happens if I do not enable the indicator?
Employment Allowance will not appear in the Third-Party EFT output. Your EPS claim to HMRC will still be valid, but the EFT listing will not reflect the reduction, which may cause a discrepancy between your EFT output and the amount actually due to HMRC.
Can I enable this mid-year?
Yes. You should ensure your EPS claim to HMRC has already been submitted before enabling the indicator, and verify that the cumulative position to date is correctly reflected in the EFT output going forward.
We have multiple companies in PeopleXD, do I need to configure each one?
Yes. The indicator is set per company. Only companies where Employment Allowance has been claimed, and the eligibility criteria are met, should have the indicator enabled.
Does Employment Allowance carry forward if unused?
No. Any unused portion of the Employment Allowance at the end of the tax year is lost. The allowance must be re-claimed each year via a new EPS submission to HMRC.
Support and further information
For queries relating to Employment Allowance eligibility and EPS submission, refer to HMRC Employment Allowance guidance.
For issues with the Third-Party EFT output or the Employment Allowance indicator not behaving as expected, raise a support case with Access via the standard support channels.