What is Employment Allowance -- Eligibility and Claim?

Full Definition

The Employment Allowance (EA) reduces an eligible employer's Class 1 secondary (employer) National Insurance liability by up to GBP 10,500 per tax year from 6 April 2025 (increased from GBP 5,000). The allowance is set against employer NI due through the Real Time Information (RTI) payroll system each pay period until it is exhausted for the year. Eligible employers include: most limited companies with at least two employees (or one employee who is not the sole director); partnerships; sole traders with employees; and charities. The key exclusion is a limited company where the sole director is the only employee -- such a company cannot claim EA. The previous GBP 100,000 employer NI threshold that restricted large employers was removed from April 2025, so all eligible employers can now claim regardless of NI bill size. Connected companies (broadly, those under common ownership) share a single EA between them and must nominate which company claims it. Charities and Community Amateur Sports Clubs (CASCs) can claim even if their Class 1 employer NI liability is nil. The EA is classified as de minimis state aid for most employers, so claimants must confirm they have not exceeded the de minimis threshold in relevant sectors. The claim is made through payroll software by selecting the EA indicator -- no separate HMRC form is required. The EA is reset each 6 April.

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