Employment Allowance 2025/26: £10,500 Amount, Eligibility & How to Claim
Employment Allowance is £10,500 for 2025/26 — no turnover cap. Check if your business qualifies, how to claim through payroll, and how much you can offset against employer NI.
What Is Employment Allowance?
Employment Allowance is a government relief that allows eligible employers to reduce their annual Class 1 National Insurance liability by up to £10,500. It effectively makes the first £10,500 of employer NI free each tax year.
For the 2026/27 tax year, Employment Allowance has been significantly enhanced — both the amount and eligibility have been expanded to help businesses cope with the increased employer NI rate.
Key Changes for 2026/27
| Feature | 2024/25 | 2026/27 |
|---|---|---|
| Allowance amount | £5,000 | £10,500 |
| NI liability cap | £100,000 (employers with NI bills above this cannot claim) | No cap |
| Employer NI rate | 13.8% | 15% |
The doubling of the allowance (plus the removal of the cap) is designed to offset the NI rate increase for smaller employers. Use our employer NI calculator to see the impact on your business.
Who Can Claim?
Most employers with at least one employee (other than the director) can claim Employment Allowance. Eligible organisations include:
- Limited companies with employees
- Sole traders with employees
- Partnerships with employees
- Charities
- Community amateur sports clubs (CASCs)
- Businesses of any size (the £100k cap has been removed)
Who Cannot Claim?
- Single-director companies with no other employees — if you are the only employee and also a director, you cannot claim
- Public bodies and organisations carrying out functions of a public nature (e.g., NHS trusts, local authorities)
- Domestic employers (e.g., employing a nanny or au pair in your home)
- Employers who have exceeded the de minimis state aid limit (generally €300,000 over 3 years for most sectors)
Connected Companies
If your business is part of a group of connected companies, only one company in the group can claim Employment Allowance. Connected companies share the single allowance — it cannot be split between them.
Companies are connected if one controls the other, or if both are controlled by the same person or group.
How Much Will You Save?
| Number of Employees | Average Salary | Total NI Bill | After EA (£10,500) | Saving |
|---|---|---|---|---|
| 1 | £25,000 | £3,000 | £0 | £3,000 |
| 3 | £25,000 | £9,000 | £0 | £9,000 |
| 5 | £25,000 | £15,000 | £4,500 | £10,500 |
| 5 | £35,000 | £22,500 | £12,000 | £10,500 |
| 10 | £30,000 | £37,500 | £27,000 | £10,500 |
| 20 | £30,000 | £75,000 | £64,500 | £10,500 |
Businesses with fewer employees and lower salaries benefit proportionally more, as the allowance covers a larger share of their total NI bill.
How to Claim Employment Allowance
Step 1: Check Eligibility
Confirm you meet the criteria above. If you're a director-only company, you do not qualify. If you're part of a connected group, agree which company will claim.
Step 2: Claim Through Payroll Software
Employment Allowance is claimed through your payroll software (or your payroll provider) as part of your Employer Payment Summary (EPS). You tick a box to indicate you are claiming, and the software automatically applies the allowance against your NI liability.
Step 3: Claim at the Start of Each Tax Year
You must claim Employment Allowance each tax year — it does not carry forward automatically. The claim can be made from your first payroll run of the tax year (April onwards). It is applied on a month-by-month basis until the £10,500 is used up.
Step 4: Monitor and Adjust
Keep track of how much allowance you have remaining. Your payroll software should do this automatically, reducing your NI payment each month until the full £10,500 has been used.
De Minimis State Aid
Employment Allowance counts as de minimis state aid under UK subsidy control rules. The general limit is €300,000 (approximately £260,000) over a rolling 3-year period.
For most small and medium businesses, this is unlikely to be an issue. However, if you receive other forms of state aid (grants, subsidised loans, etc.), you should check whether claiming Employment Allowance would push you over the limit.
Some sectors have different de minimis limits — agriculture and fisheries, for example, have lower thresholds. Check with your accountant if you're unsure.
Employment Allowance and Other NI Reliefs
Employment Allowance can be combined with other NI reliefs:
- Under-21 and apprentice relief: you can claim the higher threshold for young workers AND Employment Allowance. The EA applies to your remaining NI bill after the age-related relief
- Veterans relief: employers hiring qualifying veterans get zero employer NI for the first 12 months, reducing the NI bill that the Employment Allowance needs to cover
- Freeport relief: businesses in designated Freeport areas can benefit from zero employer NI on new hires alongside Employment Allowance
Common Questions
Can I claim if I only have one employee?
Yes, as long as that employee is not also the sole director. If you have one director and one other employee, you can claim.
What if my NI bill is less than £10,500?
You simply pay no employer NI for the year. The unused portion of the allowance is not refundable and cannot be carried forward to the next year.
Can I backdate a claim?
You can claim Employment Allowance at any point during the tax year, and it will be applied retrospectively to the start of the year. You can also claim for previous tax years by contacting HMRC (up to 4 years back).
Key Takeaways
- Employment Allowance saves eligible employers up to £10,500 per year on NI
- The £100k NI liability cap has been removed for 2026/27
- Claim through your payroll software at the start of each tax year
- Single-director companies with no other employees cannot claim
- Connected companies share a single allowance
See how Employment Allowance affects your NI bill with our employer NI calculator.