Employment Allowance 2026/27: £10,500 Eligibility and How to Claim

Employment Allowance 2026/27 lets eligible employers cut their employer Class 1 National Insurance by up to £10,500. It is not automatic: you claim it through payroll, and you must claim again every tax year.

It reduces the employer National Insurance shown through payroll, which can materially lower the cost of employing staff. This guide covers the amount, who is excluded and how to claim correctly.

Who Can Claim Employment Allowance in 2026/27?

Most businesses and charities that pay employer Class 1 National Insurance can claim.

Since 6 April 2025 there is no longer a £100,000 limit on the previous year’s employer National Insurance bill, so larger employers can now qualify too.

Who Cannot Claim Employment Allowance?

• a company whose only employee paid above the secondary threshold is a director
• public bodies, and businesses doing more than half their work in the public sector, unless they are a charity
• more than one company or charity in a connected group
• employers of domestic staff, unless the staff are care or support workers
• payments treated as employment under the IR35 off-payroll rules

How Do You Claim Employment Allowance?

• Open the employer settings in your payroll software.
• Confirm the business meets the eligibility conditions.
• Set the Employment Allowance indicator to “Yes”.
• Submit an Employer Payment Summary to HMRC.
• Check the PAYE account to confirm the reduction is being applied.

If your software cannot send the relevant EPS field, HMRC’s Basic PAYE Tools can be used. Follow the official Employment Allowance claim instructions.

Do You Have to Claim Again Every Year?

Yes. You must claim again for 2026/27 even if you received the allowance in 2025/26.

Eligibility can change when a business restructures, becomes connected to another company, changes its workforce or starts doing mainly public-sector work.

When Should You Stop a Claim?

If the business becomes ineligible, change the EPS indicator to “No”.

Don’t stop just because the full allowance has been used or you have temporarily stopped employing staff. HMRC’s rules let the claim continue to the tax-year end in those cases, and stopping wrongly can bring back liabilities already relieved.

How Does Employment Allowance Fit Into Payroll Planning?

Build the allowance into cash-flow forecasts, but only once eligibility is confirmed.

Our payroll service for employers handles RTI submissions, EPS claims, pensions and payroll records. Our small-business payroll guide covers the wider picture.

We support employers across Lancashire, including businesses looking for an accountant in Burnley or accountant in Accrington.

How Does Employment Allowance Work in Practice?

Illustrative examples: the figures are made up to show how the allowance works and are not from a real client.

Employer NIC below £10,500

If an eligible employer’s secondary Class 1 NIC for the year totals £7,200, Employment Allowance can reduce that liability to nil. The unused £3,300 is not refunded and cannot be carried forward.

Employer NIC above £10,500

If eligible employer NIC totals £18,000, the allowance can reduce it by £10,500, leaving £7,500 payable. Payroll software normally applies the relief as liabilities arise until the maximum is reached.

Sole-director company

A company cannot claim where its single director is also the only employee generating an employer Class 1 NIC liability. Employing another person does not automatically guarantee eligibility, but it can change the position and should prompt a fresh review.

Which National Insurance Does It Reduce?

The allowance reduces eligible employer Class 1 National Insurance.

It does not reduce Income Tax deducted from employees, employee National Insurance, pension contributions or every other employer liability. Your PAYE account may still show amounts due while the allowance is being used.

Can You Claim for an Earlier Year?

HMRC allows claims for up to four previous tax years, but the conditions and allowance amount for that earlier year apply.

That means the old £100,000 employer NIC limit can matter for 2024/25 and earlier claims, even though it no longer restricts a 2026/27 claim. Earlier-year claims can also need information about de minimis state aid.

What Should Employers Check?

• Confirm the employer and its workers fall within the eligibility rules.
• Check whether the company is connected with another business or charity.
• Choose one PAYE scheme if the employer operates several payrolls.
• Submit a new claim for 2026/27 through an EPS.
• Reconcile the relief against HMRC’s PAYE account.
• Review eligibility after ownership or activity changes.

Frequently Asked Questions

How much is Employment Allowance in 2026/27?

The maximum Employment Allowance for 2026/27 is £10,500. It reduces eligible employer Class 1 National Insurance liabilities until the allowance is used or the tax year ends.

Is there still a £100,000 National Insurance limit?

No. The previous £100,000 employer Class 1 National Insurance liability limit applies only to 2024/25 and earlier claims, not claims from 2025/26 onwards.

Can a company with one director claim?

Not if the director is the company’s only employee liable for secondary Class 1 National Insurance. A company with other qualifying employees may be eligible.

Do I have to claim Employment Allowance every year?

Yes. Employment Allowance does not renew automatically. An eligible employer must submit a fresh claim for each tax year through payroll software or HMRC Basic PAYE Tools.

Can connected companies all claim £10,500?

No. Only one company or charity within a connected group can claim Employment Allowance for a tax year.

The Bottom Line

Employment Allowance 2026/27 is worth up to £10,500 to an eligible employer, but only if you check eligibility and claim it again this tax year.

Watch the exclusions that catch people out most: a sole director as the only employee paying employer NIC, connected companies, and mainly public-sector work. If anything about your business changes, check again.

If you’d like us to check your eligibility and make the claim through your payroll, book a free consultation.

Tax figures checked by Rehan Razzaq FCCA on 8 October 2026 for the 2026/27 tax year.