Employment Allowance 2026/27: Eligibility, How to Claim and the £10,500 Limit
Employment Allowance lets eligible employers reduce their employer National Insurance bill by up to £10,500 in 2026/27 (confirmed by HMRC — same as 2025/26).
£10,500
Maximum Employment Allowance for 2026/27
The allowance reduces your employer (secondary) Class 1 National Insurance bill. It is per business (PAYE scheme group), not per employee. The £100,000 eligibility cap was removed from April 2025, so business size no longer matters.
What is Employment Allowance?
Employment Allowance offsets employer (secondary) Class 1 National Insurance. In 2026/27, employer NI is due at 15% on earnings above the £5,000 Secondary Threshold. The allowance sits against that liability and reduces the amount the employer actually pays HMRC.
It is important to remember that Employment Allowance is per business (PAYE scheme group), not per employee. One company with one PAYE scheme can claim one allowance of up to £10,500, regardless of how many staff it has.
Who can claim in 2026/27
Businesses and charities with an employer Class 1 National Insurance liability can claim. The key change for 2026/27 is that the old £100,000 eligibility cap was removed from April 2025, so business size no longer matters.
You can claim if you are an employer paying employer Class 1 NI and none of the exclusions apply. The allowance is claimed through your payroll software or HMRC Basic PAYE Tools and then used automatically against your monthly or quarterly PAYE bill.
Who CANNOT claim
The big exclusion for this site's audience is single-director companies. If the only employee paid above the £5,000 Secondary Threshold is also a director, the company cannot claim Employment Allowance.
Other exclusions include:
- • Employers of mainly domestic staff, such as nannies or personal care assistants.
- • Public bodies or businesses doing more than half their work in the public sector.
- • Connected companies under common control — they share one allowance between the group.
For a deeper look at the single-director rules, see our Employment Allowance for Single Director Companies guide.
How much is it worth to a director?
Employment Allowance can completely change the optimal salary for a director.
Worked example: eligible company
With Employment Allowance, a director salary of £12,570 (the full Personal Allowance) incurs employer NI on the amount above the £5,000 Secondary Threshold:
15% × (£12,570 − £5,000) = £1,135.50
Employer NI, fully covered by £10,500 allowance
So the company pays no employer NI at all. In this situation, the director receives a tax-free salary, builds a State Pension qualifying year, and usually saves Corporation Tax too.
Rule of thumb:
- • Eligible companies (multi-employee, or two+ directors earning above £5,000) should usually pay the director £12,570.
- • Ineligible single-director companies usually pay the Lower Earnings Limit — £6,708 in 2026/27 — to keep a State Pension qualifying year at zero NI cost.
Model your own numbers with the calculator on the homepage.
How to claim
Claiming Employment Allowance is done through your payroll submission:
- Tick "Yes" to Employment Allowance on an Employer Payment Summary (EPS) in your payroll software, or in HMRC Basic PAYE Tools if you do not use commercial software.
- The allowance offsets employer NI as it accrues through the year. Each PAYE period, your employer NI liability is reduced until the £10,500 limit is used up.
- You must re-claim each tax year. The claim does not roll over automatically, so remember to reselect it in April.
- Backdated claims are possible for up to four previous tax years if you were eligible but did not claim.
Common mistakes
Claiming as a single-director company
Companies where the only employee paid above the Secondary Threshold is a director are not eligible. HMRC can claw back any wrongly claimed allowance and charge penalties.
Forgetting to re-claim in April
The claim must be made each tax year. If you do not re-tick the box in April, you may start paying employer NI again unnecessarily.
Assuming it covers employee NI
Employment Allowance only reduces employer (secondary) Class 1 NI. It does not cover employee (primary) NI or other taxes.
Two companies under common control
Connected companies in the same control group can only claim one Employment Allowance between them, not one per company.
Frequently Asked Questions
Sources
Disclaimer: This guide reflects the 2026/27 rates and rules published by HMRC. Please verify with HMRC or a qualified accountant before making financial decisions.