Employment Allowance – What is it and can I use it?
One of the often unexpected costs to small business employers is Class 1 Employer National Insurance Contributions. These contributions are in addition to any deductions you’ve taken from your employee’s wages. If you’re an eligible employer, you can reduce this liability by using the Employment Allowance.
For the 2026 / 2027 tax year, the allowance is £10,500.
Can I use it for my business?
The basics on eligibility for the Employment Allowance are;
- You can claim if you’re a you’re a business or public body AND you do less than half your work in the public sector (such as for local councils and NHS services). You can also claim Employment Allowance if you’re a charity (including community amateur sports clubs) or you employ a care or support worker, for example, to care for someone with a mental or physical disability.
- If you’re part of a group of charities or companies (also known as connected companies), only one company in the group can claim the allowance.
- If your company has only one director, they must not be the only employee liable for secondary Class 1 National Insurance.
For more detailed guidance on eligibility and some worked examples, click here.
How do I get it?
You need to make a claim each tax year. You can claim at any time in the tax year, but the earlier you claim the sooner you will get the allowance. The Employment Allowance isn’t an amount paid to you because it’s applied as a reduction to the Class 1 Employer’s NICs you pay to HMRC. You’ll start to pay Class 1 Employer’s NICs once the £10,500 allowance is used up, each tax year.
Depending on your system, you’ll claim in different ways, but it’s generally done by sending an Employer Payment Summary (EPS) to HMRC;
- Select YES for the Employment Allowance indicator
You can find more detail on the various claim procedures and how to stop a claim here.
