For the 2020-21 tax year most employers who pay an employee more than £169 per week will start to incur an employers class 1 national insurance liability at a rate of 13.8%. This threshold can vary depending on the employees national insurance category however the £169 threshold is what currently applies to the vast majority of UK employees.
To help some smaller employers HMRC introduced the employment allowance which is currently £4,000 for the 20/21 tax year. This allowance will result in the first £4,000 of class 1 national insurance liability that the employer incurs being reduced to zero.
As this is an allowance it does not matter if the employer incurs less than £4,000 liability in the tax year. They will still be able to reduce the liability they have to zero. For example if a qualifying employer incurs £2,000 employers class 1 national insurance liability in the 20/21 tax year then they will still be able to reduce the liability to zero. Unfortunately the remaining allowance of £2,000 may then be lost as it cannot be carried forward to future tax years. It is however possible to backdate a claim for the employment allowance up to 4 tax years as far back as the 16/17 tax year which can result in a repayment where national insurance liabilities have already been paid.
It is worth noting that from 2016 to 2020 the employment allowance was only £3,000 per year so any backdated claim would be processed using this lower allowance.