Answers · UK 2025/26
What is the Employment Allowance and who qualifies?
The Employment Allowance lets eligible employers reduce their Class 1 NI liability by up to £10,500 per year in 2026/27. Most small businesses qualify — you cannot claim if you are a sole director with no other employees, or if your NI bill exceeded £100,000 in the prior year.
Full answer
The Employment Allowance, introduced in 2014, is an annual reduction in employer Class 1 National Insurance contributions. For 2026/27 the allowance is £10,500 (increased from £5,000 in 2023/24 and £10,500 from April 2025). **Who qualifies:** - Any business or charity whose total employer NIC bill in the prior tax year was less than £100,000. - Employers with multiple employees, partnerships, limited companies with employees other than the sole director. - Businesses with employees working less than full-time still qualify if the other conditions are met. **Who cannot claim:** - A limited company where the only employee is also the sole director (single director-only companies). - Individuals employing a domestic worker (e.g. nanny, carer) at their home. - Companies where the sole director is paid above the Secondary Threshold. - Connected companies: a group of connected companies can only claim one allowance in total — usually allocated to the company with the highest NIC bill. - Public bodies and businesses where more than 50% of work is for public authorities. **How to claim:** The allowance is claimed through your payroll/RTI (Real Time Information) submission — tick the Employment Allowance box in your payroll software. It reduces your monthly employer NIC payments until the full £10,500 is used (or the tax year ends). No separate HMRC form is needed, but HMRC may request verification. **Example impact (2026/27):** An employer paying one member of staff £50,000 owes approximately £7,285 in employer NIC (15% on £50,000 − £5,000 secondary threshold). With the Employment Allowance, the employer pays £0 employer NIC and keeps the remaining £215 of the allowance for other employees.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.