Written by EmployerCalculator Editorial · Reviewed against official UK sources · Last updated: April 2025
Eligibility rules, payroll claiming process and worked examples for Employment Allowance in 2025/26.
Employment Allowance reduces an eligible employer's annual Class 1 NI bill. For 2025/26 the maximum relief is £10,500, up from £5,000 in 2024/25.
The allowance is applied against employer NI liabilities through payroll reporting. It does not reduce employee NI and does not alter gross salary calculations.
For eligible small and medium employers, this can remove a large share of NI cost for one or more employees.
Businesses and charities can usually claim, subject to standard HMRC conditions. One key exclusion remains companies where the only paid employee is a director.
The previous £100,000 NI cap has been removed, so more employers can qualify in 2025/26 than in prior years.
Where group structures exist, payroll teams should confirm allowance treatment is applied correctly across connected entities.
Claiming is completed in payroll software using the Employment Allowance indicator in your Employer Payment Summary process.
Track allowance utilisation monthly. Once fully used, NI liabilities return at the standard rate for subsequent pay periods.
Keep internal documentation for audit and handover. The most common issue is not eligibility but inconsistent operational setup.
Put the figures from this guide into practice with the live calculator tools below.
EmployerCalculator Editorial. Content reviewed against HMRC guidance. Estimates only — not financial or legal advice. See our methodology and sources.
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