Employment Allowance 2026/27

What Employment Allowance does

Employment Allowance lets eligible employers reduce their annual National Insurance liability by up to £10,500. You pay less employers' Class 1 National Insurance each time you run payroll until the £10,500 has gone or the tax year ends. It applies to employers' Class 1 only, so it does not touch employees' NI, Class 1A on benefits or the Apprenticeship Levy. You can claim even if your liability for the year was lower than £10,500.

To see what it saves against your own payroll, use the Employer NI Calculator.

Who can claim

• A business or public body that does less than half its work in the public sector (such as for local councils and NHS services).
• A charity, including a community amateur sports club.
• Anyone who employs a care or support worker, for example to care for someone with a mental or physical disability.

A public body, or a business doing more than half its work in the public sector, cannot claim unless it is a charity. A company with only one director cannot claim if that director is the only employee liable for secondary Class 1 National Insurance.

From April 2025, employers with more than £100,000 of Class 1 National Insurance liabilities can also apply. The £100,000 limit applied to claims for 2024/25 and earlier.

Employees, groups and payrolls

• Employees left out: someone whose earnings are within the IR35 off-payroll working rules, and someone you employ for personal, household or domestic work (a nanny or gardener) unless they are a care or support worker.
• Connected companies: if you are part of a group of charities or companies, only one company in the group can claim. The same connection test decides whether you share one Apprenticeship Levy allowance.
• More than one payroll: you can claim against only one of your payrolls.

How to claim

You need to claim every tax year. You can claim at any point in it, and you can start using the allowance as soon as you submit the claim. HMRC does not send a confirmation letter.

1. Payroll software: put 'Yes' in the 'Employment Allowance indicator' field the next time you send an Employment Payment Summary (EPS) to HMRC.
2. No such field: use HMRC's Basic PAYE Tools. Select the employer, choose 'Employment Allowance', check the eligibility criteria, then send your EPS as normal.

If you claim late and do not use the allowance against your employers' Class 1 liabilities, you ask HMRC to use any unclaimed allowance at the end of the year against other tax or National Insurance you owe, or to refund it if you owe nothing. You cannot claim a refund for the difference between your total employers' Class 1 liability and the full allowance. You can see how much you have used in your HMRC online account.

If you stop being eligible, select 'No' in the indicator on your next EPS. Reaching the £10,500 limit before 5 April does not make you ineligible, and neither does having no employees; the allowance simply stops at the end of the tax year. If you stop a claim before the year ends, any allowance already given for that year is removed and the employers' Class 1 due as a result becomes payable.

Claiming for earlier years

You can claim for the previous 4 tax years if you are a business or charity, or you employ a care or support worker. For 2024/25 or earlier, your employers' Class 1 National Insurance liabilities must have been under £100,000 in the previous tax year. For 2025/26 or later there is no such limit.

For some businesses Employment Allowance counts as de minimis state aid, which has a three-year limit by sector. GOV.UK says the limits are likely to apply if your business is in Northern Ireland and makes or sells goods or wholesale electricity.