What is the Employment Allowance for 2026/27?

Full answer

The **Employment Allowance** is a relief that reduces an employer's Class 1 National Insurance (employer NI) liability. For 2026/27, the allowance is **£10,500** — an increase from £5,000 in 2023/24 and reflecting the April 2025 Budget changes. **Key facts for 2026/27:** - **Amount:** £10,500 per employer group per tax year - **Who can claim:** Most employers with a Class 1 NI liability in the previous tax year - **Eligibility cap:** Removed from April 2025 — previously limited to employers with a Class 1 NI bill of £100,000 or less - **Claimed via:** Payroll software / PAYE — flag it in your employer payment summary (EPS) **Who qualifies:** - Limited companies with two or more employees (or one employee who is not the sole director) - Partnerships with employees - Charities and Community Amateur Sports Clubs - Sole traders with employees **Who does NOT qualify:** - Companies where the director is the only employee (no other employees earning above the Secondary Threshold) - Public bodies and quasi-government organisations - Domestic employers (nannies, gardeners for private homes) **Connected companies:** If you control two or more companies, they are connected and can only claim one £10,500 allowance between them. You choose which company claims it. **Interaction with the April 2025 employer NI rise:** From April 2025, the employer NI rate rose to 15% and the Secondary Threshold fell to £5,000/year. The Employment Allowance increase to £10,500 was designed to offset this for smaller employers. A company with 3 employees each earning £25,000 would pay employer NI of £3,000/year each = £9,000 total — fully covered by the allowance. **De minimis State Aid:** The Employment Allowance is classified as de minimis State Aid. If you receive other de minimis State Aid, you must check you remain under the £315,000 threshold (£730,000 for road transport) over 3 fiscal years.

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