The Employment Allowance can help eligible employers reduce their National Insurance costs by up to £10,500 each tax year. The allowance reduces an employer’s Class 1 National Insurance liability and is applied automatically through payroll once a valid claim has been made.
Most businesses can claim, provided they do not carry out more than half of their work in the public sector. Public sector bodies are generally excluded. Charities, including community amateur sports clubs, and employers of care or support workers may also qualify. In addition, the old £100,000 restriction on employers’ Class 1 National Insurance liabilities was removed from April 2025 meaning more employers are able to benefit from the allowance.
There remain certain employers that cannot claim such as companies where the only employee liable for secondary Class 1 National Insurance is the sole director. The allowance cannot be claimed for certain employees, such as workers caught by the off-payroll working rules or those employed for personal or domestic work, unless they are providing care or support.
Employers must claim the allowance each tax year. The earlier a claim is made, the sooner the saving can be used against payroll costs. Claims are made through payroll software by submitting an Employment Payment Summary (EPS) to HMRC.
Eligible employers can also make claims for the previous four tax years, subject to the relevant conditions.
