What is the Employment Allowance and how much is it in 2026/27?

Full answer

The Employment Allowance (EA) is an annual reduction in employer Class 1 National Insurance contributions (NICs) available to eligible employers. It was introduced in April 2014 and has been increased significantly to offset the impact of the April 2026 employer NI rise. Amount in 2026/27 GBP 10,500 per tax year (up from GBP 5,000 in 2025/26). The increase reflects the rise in the employer NI rate from 13.8% to 15% from April 2026 and the reduction in the Secondary Threshold from GBP 9,100 to GBP 5,000. How it works The EA offsets against monthly employer NI payments until the GBP 10,500 is exhausted. It does not need to be claimed equally each month -- it is applied to reduce the earliest payments first. Example: employer NI liability GBP 2,000/month; EA of GBP 10,500 covers months 1-5 in full and reduces month 6 by GBP 500. From month 6 onwards, the employer pays full NI. Who is eligible? -- Most employers with employer NI liability can claim -- Connected companies share one GBP 10,500 limit (anti-avoidance) Who cannot claim? -- Single-director companies with no other employees (where the sole employee is also the sole director) -- Public bodies (government departments, local councils) -- Employers who are a service company and whose workers are supplied by a third party -- Employers whose total employer NI bill in the prior tax year exceeded GBP 100,000 (state aid de minimis rule applies for certain businesses) How to claim Claim by setting the Employment Allowance indicator to "Yes" in your payroll software or via HMRC's Basic PAYE Tools. The claim must be made for each tax year. State aid The EA counts as de minimis state aid for certain sectors (agriculture, fisheries, road transport). Most employers are unaffected.