Employment Allowance Calculator
Last updated: February 2026
Reduce your employer National Insurance by up to £5,000
Check Your Eligibility
Answer these questions to check if you can claim Employment Allowance:
How to Claim Employment Allowance
Step-by-Step Process
- Check eligibility - Use our checker above
- Access your payroll software - Sage, Xero, QuickBooks, etc.
- Enable Employment Allowance - Usually found in employer settings
- Submit EPS to HMRC - Your software will include the EA indicator
- NI is automatically reduced - The allowance offsets your payments
Key Information
| Allowance Amount | £5,000 |
| Who Claims | Employer (not employee) |
| What It Reduces | Employer Class 1 NI only |
| Previous Year NI Limit | Under £100,000 |
| How Many Claims | One per tax year, per group |
What is Employment Allowance?
Employment Allowance is a government scheme that allows eligible employers to reduce their annual employer National Insurance liability by up to £5,000.
Key Benefits
- Reduces your employer Class 1 NI bill by up to £5,000
- Available to businesses, charities, and CASCs
- Claimed through your payroll software
- Automatically reduces NI payments throughout the year
- No limit on number of employees
Who Can Claim?
- Businesses, charities, and community amateur sports clubs
- Previous year's employer NI was under £100,000
- Must have employees other than just directors (see exceptions)
- Not part of a group that has already claimed
- Not mainly doing public sector work
Director-Only Companies
Special rules apply if you're a limited company with only directors:
Common Scenarios
| Scenario | Can Claim? |
|---|---|
| 1 director, no employees | No |
| 1 director + 1 employee | Yes |
| 2 directors, no employees | Yes* |
| Director + spouse on payroll | Yes |
| Sole trader with 1+ employees | Yes |
*If both directors are on payroll and have employer NI liability
Connected Companies
If you control multiple companies, you can only claim one Employment Allowance between them:
- Companies under common control count as connected
- Choose the company with the highest NI bill to claim
- The claiming company gets up to £5,000 off their NI
- Other connected companies get nothing
Frequently Asked Questions
Pro Tips for Accurate Results
- Double-check your input values before calculating
- Use the correct unit format (metric or imperial)
- For complex calculations, break them into smaller steps
- Bookmark this page for quick future access
Understanding Your Results
Our Employment Allowance Calculator provides:
- Instant calculations - Results appear immediately
- Accurate formulas - Based on official UK standards
- Clear explanations - Understand how results are derived
- 2025/26 updated - Using current rates and regulations
Common Questions
Is this calculator free?
Yes, all our calculators are 100% free to use with no registration required.
Are the results accurate?
Our calculators use verified formulas and are regularly updated for accuracy.
Can I use this on mobile?
Yes, all calculators are fully responsive and work on any device.
Understanding Employment Allowance in Detail
Employment Allowance is a government incentive designed to support smaller employers by reducing their annual National Insurance (NI) liability. For the 2025/26 tax year, eligible employers can claim up to £5,000 off their employer Class 1 NI contributions. This relief was introduced in April 2014 at £2,000 and has been increased several times since, most recently to £5,000 from April 2022.
Eligibility Criteria
Not all employers qualify for Employment Allowance. HMRC applies several conditions that must be met:
- £100,000 threshold: Your total employer Class 1 NI liability in the previous tax year must have been below £100,000. If it was £100,000 or more, you cannot claim regardless of other factors.
- Single director companies excluded: If your company has only one employee who is also a director (and no other employees), you are not eligible. There must be at least one additional employee on the payroll.
- Connected companies rule: Where two or more companies are under common control, they are treated as connected. Only one Employment Allowance can be claimed across all connected companies. You must nominate which company will receive it.
- De minimis state aid: Employment Allowance counts as de minimis state aid under UK subsidy control rules. Your total de minimis aid across all schemes must not exceed £315,000 over a rolling three-year period. If you receive other forms of state aid, you must check that claiming Employment Allowance does not push you over this limit.
- Public bodies and personal service companies: Most public-sector employers cannot claim. Companies where more than 50% of work is carried out for a single client through an intermediary (IR35 arrangements) may also be excluded.
How to Claim via EPS
You claim Employment Allowance through your payroll software by submitting an Employer Payment Summary (EPS) to HMRC. Here is the step-by-step process:
- Open your payroll software at the start of the tax year (or whenever you want to begin claiming).
- Navigate to the Employment Allowance section and tick the indicator to confirm you are eligible.
- Your software will include the Employment Allowance flag on your next EPS submission to HMRC.
- HMRC will automatically reduce your employer NI payments until the £5,000 allowance is used up or the tax year ends.
- You must re-claim each tax year. The claim does not automatically carry forward.
You can claim at any point during the tax year, not just in April. If you claim mid-year, HMRC will apply the full £5,000 against your remaining NI liability for that year. However, you cannot backdate a claim to a previous tax year.
Worked Examples
Example 1: Small Retail Business with 4 Employees
A shop owner employs 4 part-time staff, each earning £15,000 per year. The employer NI rate for 2025/26 is 15% on earnings above the secondary threshold of £5,000 per employee.
- NI-able earnings per employee: £15,000 - £5,000 = £10,000
- Employer NI per employee: £10,000 x 15% = £1,500
- Total employer NI for 4 staff: 4 x £1,500 = £6,000
- Employment Allowance applied: -£5,000
- Actual NI payable: £1,000 (saving £5,000)
Without Employment Allowance, this employer would pay £6,000 in NI. With the allowance, they pay just £1,000 -- a saving of 83%.
Example 2: Charity with 2 Full-Time Staff
A registered charity employs 2 full-time workers, each earning £28,000. Charities are eligible for Employment Allowance on the same terms as businesses.
- NI-able earnings per employee: £28,000 - £5,000 = £23,000
- Employer NI per employee: £23,000 x 15% = £3,450
- Total employer NI for 2 staff: 2 x £3,450 = £6,900
- Employment Allowance applied: -£5,000
- Actual NI payable: £1,900 (saving £5,000)
The charity benefits from the full £5,000 allowance, reducing its NI bill by 72%. This saving can be redirected to core charitable activities.
Additional FAQs
Can I claim Employment Allowance if I also receive the small business rate relief?
Yes. Employment Allowance and business rates relief are separate schemes. However, both count towards your de minimis state aid total. You must ensure the combined value of all de minimis aid received does not exceed £315,000 over three years. For most small businesses, this will not be an issue, but it is worth checking if you receive multiple forms of government support.
What happens if I claim Employment Allowance incorrectly?
If HMRC discovers you have claimed when you are not eligible -- for example, because your company is connected to another that has also claimed, or because you are a single-director company -- you will need to repay the full amount. HMRC may also charge interest on the underpayment. In serious cases, penalties may apply. If you realise you have claimed in error, notify HMRC promptly by updating your EPS to remove the Employment Allowance indicator.
Does Employment Allowance apply to employer NI on employee benefits in kind?
No. Employment Allowance only reduces employer Class 1 NI contributions, which are calculated on cash earnings. Class 1A NI (charged on most benefits in kind) and Class 1B NI (charged on PAYE Settlement Agreements) are not reduced by Employment Allowance. These must be paid separately in full.
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