Last updated: 18 October 2026
The Employment Allowance lets eligible employers reduce their secondary (employer’s) Class 1 National Insurance bill. For 2026/27 it is £10,500, capped at the employer’s secondary Class 1 National Insurance for the year where that is lower. It is not given automatically and must be claimed.
How Much Is the Employment Allowance for 2026/27?
The allowance is £10,500 for 2026/27, the same as for 2025/26. It more than doubled from £5,000 in April 2025, when the employer’s National Insurance rate rose to 15% and the secondary threshold fell to £5,000 a year. For many small employers it now wipes out the employer’s National Insurance bill entirely.
Eligible Employers
The National Insurance Employment Allowance is only available to eligible employers. Until April 2025, employers could only claim if their employer’s Class 1 National Insurance bill for the previous tax year was under £100,000. That limit was removed from 6 April 2025, so larger employers can now claim too, provided they are not otherwise excluded. Connected companies, such as members of a group, can only claim one allowance between them.
Some employers still cannot claim, however large or small their National Insurance bill. The main exclusion is a company where the only employee paid above the secondary threshold (£5,000 for 2026/27) is a director, which rules out most single-director personal companies. Public bodies and businesses doing more than half their work in the public sector are excluded too, unless they are charities.
Making A Claim
The Employment Allowance is not given automatically, and employers must claim it. The claim is usually made through the employer’s payroll software. If the employer uses HMRC’s Basic PAYE Tools, the claim can be made there instead.
The claim is made in an Employer Payment Summary (EPS) by selecting ‘yes’ in the ‘Employment Allowance indicator’ field. You need to claim again at the start of each new tax year.
If an employer is no longer eligible, or a claim has been made in error, the employer should enter ‘no’ in the ‘Employment Allowance indicator’ field on their next EPS. If a claim is stopped before the end of the tax year, any allowance already given will be clawed back, and the employer must pay the secondary Class 1 National Insurance it had covered.
Claims can be made for the previous four tax years, at the allowance rate that applied in each of those years.
Using The Allowance
Once claimed, the allowance is set against the employer’s secondary Class 1 National Insurance each pay period until it is used up. If it has not been fully used by the end of the tax year because the employer’s Class 1 bill was less than £10,500, the rest is lost. It cannot be carried forward to the next tax year or set against Class 1A or Class 1B National Insurance.
Example
A small company employs three staff, each earning £25,000 a year. Employer’s National Insurance for each is 15% of the earnings above £5,000, which is £3,000, so £9,000 in total. With the Employment Allowance claimed, the company pays no employer’s National Insurance at all for 2026/27.
Partner Note: NICA 2014, ss. 1–8.
