What is Employment Allowance, and can my business claim it?

Employment Allowance reduces eligible employer Class 1 National Insurance as payroll liabilities arise. For 2026/27, the maximum is £10,500, but a business with a smaller eligible liability only receives relief against that smaller amount. It does not reduce employees’ deductions or automatically cover every employer National Insurance charge. It is also different from a grant deposited into your bank account. Include the expected relief in payroll forecasts only after eligibility has been checked. If your staffing or pay levels change, the actual benefit can change too. A headline allowance figure is not the same as a guaranteed annual saving for every business that employs people.

Eligibility depends on the employer and activities, with exclusions for particular arrangements. A company with one director cannot claim where that director is the only employee liable for secondary Class 1 National Insurance. Employing another person does not automatically solve this if their pay does not create the relevant liability. Public-sector work and certain domestic employment arrangements also need attention. The former £100,000 employer National Insurance eligibility restriction was removed from April 2025, so avoid relying on older guidance. Ask CASS to check the current rules against the actual payroll and business activity rather than assuming the allowance applies because the business is small.

Connected companies cannot each claim a full Employment Allowance simply because they have separate payroll schemes. The rules determine which employer can claim, and the position at the start of the tax year can be important. Businesses with several PAYE schemes also need to choose the appropriate scheme. Give your adviser details of other companies under common control, ownership changes and any claim already made elsewhere. Do not split the allowance informally across companies or assume each payroll provider will discover the connection. Agree who makes the claim and document the decision. Other connected-employer rules, including those for charities, may require assessment as well.

The claim is normally made through an Employer Payment Summary using payroll software, and eligibility should be checked for each tax year. Keep evidence of the assessment and reconcile the relief to the employer’s HMRC account. If an incorrect claim has been made, arrange the appropriate correction rather than leaving the software setting unchanged. Earlier-year claims have their own time limits and use the rules applicable to those years. CASS can assess eligibility and process an agreed claim within the payroll service. Tell us promptly about changes to ownership, activities or staffing so the claim and cash-flow assumptions can be reviewed on accurate information.