Employment Allowance 2025/26: What You Really Need to Know

If you run a UK business with employees, now is the time to pay attention—because Employment Allowance, one of the most valuable tax reliefs, increased.

🚀 What’s New for 2025/26?

• The maximum Employment Allowance has nearly doubled from £5,000 to £10,500 per year.

• The previous eligibility cap—employer NI below £100,000 last year—has been fully removed.

• From 6 April 2025, your employer NIC rate rises from 13.8% to 15%, and you now start paying NIC on employee pay above £5,000/year (down from £9,100).

  
  

✅ Who Can Claim in 2025/26?

You are eligible if:

• You pay Class 1 employer National Insurance on employee wages

• You have at least one employee (who is not the sole director) earning above £5,000/year

• Your business does not primarily operate in the public sector

• You’re not a one‑director company with no other employee earning above the threshold

  
  

Example: A company employing a director and one non-director staff member earning £15,000/year qualifies—even though previously it didn’t.

💡 Why It Matters Now More Than Ever

• With employer NIC rising to 15%, small businesses face significantly higher costs.

• But the £10,500 allowance lets many employers reduce their NIC bill to zero for the year—if they claim early and meet eligibility.

• That means 865,000 employers could pay no employer NIC at all.

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🕒 When and How to Claim

• Submit your claim any point during the tax year (April 6–April 5). Claim as early as possible to maximise the benefit.

• File it via your payroll software or HMRC’s Basic PAYE Tools using the Employer Payment Summary (EPS) interface.

• The allowance applies automatically each payroll until the yearly £10,500 limit is used or you cease eligibility.

  
  

⚠️ Common Traps to Avoid

• ❌ Failing to claim—it doesn’t happen automatically

• ❌ Claiming when you're the only director and employee

• ❌ Overlooking the £5,000 earning threshold for eligibility

• ❌ Forgetting to reapply every year if still eligible

  
  

📈 What £10,500 Could Do for Your Business

That allowance could mean:

• Hiring part-time staff

• Enhancing payroll or training

• Improving cash flow or reinvesting profits

A well-structured employment setup really transforms tax planning.

🧑‍💼 Should You Chat with an Accountant?

Yes—especially because each business is unique. We can help you:

• Check if you qualify this year

• Make the claim correctly

• Structure payroll to benefit from Employment Allowance—and other reliefs like trivial benefits or director pensions

  
  

📩 Get in touch now to lock in your full allowance before time runs out.