Employment Allowance Eligibility & Savings Calculator
Employment Allowance: £10,500/yr (2025/26 & 2026/27). Claimed via payroll software EPS.
About Employment Allowance
Employment Allowance is a government scheme that reduces the employer NIC bill for eligible businesses and charities by up to £10,500 per tax year. It was significantly increased from £5,000 in April 2025 as part of a package of measures to offset the higher employer NIC rates introduced at the same time.
The allowance is claimed through payroll software and applied month by month until the full £10,500 is used up. You must re-confirm your eligibility claim at the start of each new tax year.
Frequently Asked Questions
What is the Employment Allowance in 2026?
The Employment Allowance in 2025/26 and 2026/27 is £10,500 per year. It was doubled from £5,000 in April 2025 to offset some of the increased employer NIC costs. Eligible employers can deduct up to £10,500 from their employer NIC bill each tax year.
How much is Employment Allowance in the UK?
The Employment Allowance is £10,500 for the 2025/26 and 2026/27 tax years. This means eligible employers pay no employer NIC on the first £10,500 of their annual employer NIC bill. For a business with 5 employees on average salaries, this could cover the entire employer NIC bill.
Who qualifies for Employment Allowance?
Most employers who pay employer Class 1 NIC qualify for Employment Allowance. You qualify if you are a business or charity. You do NOT qualify if: you are the sole employee and director of your company; you employ someone for personal or domestic work (unless they are a care worker); or you are a public authority. Since April 2024, there is no upper limit on the size of employer NIC bill that can claim.
How do I claim Employment Allowance?
You claim Employment Allowance through your payroll software by setting the Employment Allowance indicator to 'Yes' in your Employer Payment Summary (EPS). The allowance is then applied automatically each month, reducing your employer NIC payments to HMRC until the £10,500 is used up. You must re-confirm your claim each tax year.
Can a single director company claim Employment Allowance?
No. A company where the director is the only employee paid above the Lower Earnings Limit cannot claim Employment Allowance. However, if the company has at least one other employee (even part-time) paid above the Secondary Threshold, it can claim. This rule prevents owner-managed companies from using the allowance to avoid employer NIC on directors' salaries.