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If you’re an employer, chances are you’re already feeling the squeeze from rising staff costs. With increases in the National Living Wage, pension contributions, and employer NICs, every bit of support matters and that's where the employment allowance comes in.
The Employment Allowance has long been one of the most valuable reliefs available to small and medium-sized employers, and in 2025, it’s more than doubled, but do you still qualify, and how do you claim it properly?
National Insurance
What is the Employment Allowance?
The Employment Allowance allows eligible employers to reduce their annual Class 1 National Insurance bill. For 2025/26, the amount you can claim has risen from £5,000 to £10,500, a lifeline for businesses facing the jump to 15% employer NICs.
What’s Changed in 2025/26?
Change
2024/25
2025/26
Employer NI Rate
13.8%
15%
Employment Allowance
£5,000
£10,500
Eligibility criteria
< £100k employer NICs
Still applies, but more businesses may now qualify
These changes are designed to help smaller businesses absorb higher employment costs, but it’s easy to miss out if you don’t stay on top of your payroll.
Who Can Claim?
You may be eligible if:
You employ staff through PAYE
Your total employer NICs were under £100,000 last tax year
You’re not doing over 50% public sector work (unless you're a charity)
You can’t claim if:
You’re the sole employee and a company director
You employ someone for domestic/personal work (e.g. a cleaner)
Real-Life Example: Saving £10,500 With a Simple Checkbox Tick
One of our new clients in Birmingham was hit hard by the new 15% NIC rate. With 25 staff, their monthly employer NI bill jumped from around £2,100 to nearly £2,400.
They weren’t claiming the Employment Allowance, their previous payroll provider had never claimed it for them and it was a simple tick-box exercise.
After a quick payroll review, we and checked with the client if they were eligible, we submitted the claim and saved them the full £10,500 allowance over current the year. That simple tick in the right box saved them 2 months' worth of employer NICs.
Not only that, but we back claimed for them, as they were eligible, saving them thousands of pounds. It's a quick simple process, so don't miss out otherwise you're literally throwing money away. If you need help, please get in touch.
“I had no idea we were missing out by so much. You saved us thousands with a 10-minute fix.” — Retail client, West Midlands
❓Common Questions About the Employment Allowance
Q: Can I claim if I use an outsourced payroll company? Yes, your payroll provider can claim it on your behalf (we do this for clients routinely), but you must confirm eligibility as the provider may not have this information.
Q: Will HMRC tell me if I qualify? No, it’s up to you (or your provider) to apply correctly. If you don’t claim it, you miss out, it's that simple.
Q: Can I carry the Employment Allowance over to next year if I don’t use it all? No, it’s use-it-or-lose-it within each tax year. If you don’t use the full amount before the end of the tax year, the unused balance doesn’t roll over.
However, if you were eligible in previous years but didn’t claim, you can still back-claim the Employment Allowance for up to 4 tax years, which can result in thousands in reclaimed NICs.
Q: Can connected companies each claim the Employment Allowance? No, only one company within a connected group can claim the allowance in any given tax year, and only if the combined Class 1 employer NICs across all connected companies are less than £100,000.
A ‘connected company’ usually means:
Companies under the same control (e.g. owned by the same person or group)
Businesses that are part of a group structure (like parent and subsidiary companies)
Entities that share common ownership or directors
Example: If you own two limited companies and both have staff, they count as connected. You can only claim Employment Allowance for one of them, and only if the total NICs across both stay under the threshold.
If in doubt, it’s worth reviewing ownership and control structures carefully or getting professional advice before claiming from someone such as your accountant.
Final Thoughts
With the employer NI rate now at 15%, the Employment Allowance could save your business over ten grand, but only if it’s set up properly.
If you're unsure how to check your eligibility, or if you want to make sure you’re claiming everything you’re entitled to, we’re happy to help. We’ve already reviewed claims for hundreds of UK businesses in 2025 alone.
