The Employment Allowance lets eligible employers reduce their employer (secondary) Class 1 National Insurance bill by up to £10,500 for the 2026/27 tax year. You claim it through your payroll software, and it runs down as you offset employer NI each pay run until the £10,500 is used or the tax year ends. It was created by sections 1 to 8 of the National Insurance Contributions Act 2014.
How much is the Employment Allowance now?
| Tax year | Maximum allowance | Prior-year secondary NIC cap |
|---|---|---|
| 2024/25 | £5,000 | Excluded if over £100,000 |
| 2026/27 | £10,500 | Cap removed from 6 April 2025 |
Who can claim the £10,500 allowance?
Businesses and charities that pay employer Class 1 National Insurance can claim, as set out in the gov.uk eligibility guidance. From 6 April 2025 the previous rule that barred employers with more than £100,000 of secondary NICs in the prior year was removed, so larger employers can now claim too. The allowance offsets only employer NI; it does not change the tax or NI taken from any worker's pay.
Who is excluded from claiming it?
You cannot claim if you are a limited company whose only paid employee is also a director, a common position for one-person companies. You also cannot claim for staff you employ for personal or domestic work, such as a nanny, unless they are a care or support worker. Public bodies and businesses doing more than half their work in the public sector are excluded too, per the further employer guidance.
Does the allowance show on my payslip?
No. The Employment Allowance reduces what your employer pays to HMRC, not what you pay. Your own income tax and National Insurance deductions are unchanged, so your take-home stays the same. It matters because it lowers the real cost of employing people, which is why it is often discussed alongside the 2025 employer NI rate change.
Primary sources
- Employment Allowance: check if you can claim — gov.uk — Eligibility and how to claim through payroll software
- National Insurance Contributions Act 2014 — legislation.gov.uk — Sections 1 to 8 create the Employment Allowance
- Rates and thresholds for employers 2026 to 2027 — gov.uk — The £10,500 allowance for 2026/27
- Employment Allowance: further employer guidance — gov.uk — Excluded employers and the single-director rule
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