Employment Allowance - Director Resigns

I have a limited company currently with two directors. One of them (Director 1) is providing services via this company which is what is earning the company its revenues. They are also employed elsewhere and pay NI / tax etc. The other (Director 2) manages the company affairs and admin and has some personal allowance currently un-utilised. In order to be tax efficient, I am considering paying Director 2 a salary of £12,570. Now, this would normally result in Employers' NI for the company. However, I note there's an Employment Allowance which says up to £5k doesn't need to be paid. There are conditions to this, and the key one I am looking at is: You also cannot claim if both of the following apply: 1. you’re a company with only one employee paid above the Class 1 National Insurance secondary threshold 2. the employee is also a director of the company I am thinking - we have Director 2 resign as a director now. Then, in this last month of the tax year 2023-24, we pay Director 2 a salary of £12,570. My reading then of the situation is that "both" of the rules above don't apply - in particular, because the salary is paid to Director 2 - who following their resignation - is no longer a director of the company. Am I understanding this incorrectly?

Hi ,
 

Unfortunately we wouldnt be able to advise on this and this would be giving tax advice which HMRC does not do. If the criteria is met then you would not be able to claim EA.  Thank you .

Thank you but I am not clear. You say "If the criteria is met then you would not be able to claim EA." - is there a typo here? If we change the nature of the question, and have an actual case of a Director having already resigned, and getting salary as an employee in the month of March 2024, can you not confirm whether the company can claim the Employment Allowance?

Hi ,
 

Where a company only has directors on the payroll, to be eligible to claim EA more than 1 director has to be earing above the secondary threshold as per NIM06545 - Employment Allowance: Who can’t claim the Employment Allowance? Single director limited companies - HMRC internal manual - GOV.UK (www.gov.uk)  As per your initial enquiry you advised there were 2 directors so both need to be earning above the secondary threshold for the company to be eligible to claim EA, providing the other eligibility criteria are met. If the circumstances are that the 2nd director has resigned during the tax year and has become an employee and earns above the secondary threshold then as per NIM06545 - Employment Allowance: Who can’t claim the Employment Allowance? Single director limited companies - HMRC internal manual - GOV.UK (www.gov.uk) the additional employee test has been met so the company would be able to claim EA providing the other eligibility criteria are met. Thank you .