There’s a lot to like about the employment allowance: it’s fairly easy to understand and claim; it’s available quite widely, to most employers; and the benefit is felt quickly, through the payroll. That explains why it’s so well used, with over 1.2m employers claiming it in 2024/25, up by approximately 50,000 on 2022/23. 

However, it can be overlooked by new employers. Also, some established employers may be missing out as recent changes may mean that an employer that hasn’t claimed previously may benefit from doing so now. 

How is the allowance given?

The allowance is offset against the employer’s class 1 NIC liability each time they run the payroll, saving up to a maximum of £10,500 for 2025/26. Note that the allowance can only reduce the employer’s – not an employee’s – NIC liability.

Who can claim the employment allowance?

All employers can claim the allowance, including businesses, charities and individuals employing a care or support worker, except for:

• a public authority other than a charity. An employer is a public authority if they do half or more of their work in the public sector (eg, for councils).
• a company where:
  • all of the company’s employer’s class 1 NIC liabilities for that year relate to one employee only; and
  • that employee is a director of the company.

The exclusion for so called "single-director" companies (immediately above) can be particularly challenging to understand. This is explored in more detail in a separate article. 

Do any restrictions apply?

The employment allowance cannot be set against class 1 NIC liabilities relating to the following employees:

• someone whose earnings are within the off-payroll working rules; and
• someone employed for personal, household or domestic work (eg, a nanny or gardener), unless they’re a carer or support worker.

Further, where:

• an employer operates more than one payroll, it can claim the allowance against one of the payrolls only; and
• a company is connected with another company or companies at the start of the tax year, only one of the companies can claim the employment allowance for that tax year.

Companies are connected if one controls the other or both are under the control of the same person. However, who controls a company can be difficult to determine, particularly in the context of family businesses. This is explained in a separate article.

What’s changed?

For 2024/25, the amount of the allowance is increased from £5,000 to £10,500 and a restriction that prevented many larger employers from claiming the allowance has been removed. The changes were made to reduce the impact of the employer’s NIC increases announced at the Autumn Budget 2024 and which took effect from April 2025.

Looking further ahead, for 2025/26, the employment allowance no longer counts as de minimis state aid. This will be a welcome simplification for many businesses.

Can a claim be made for earlier years?

The employer has four years from the end of the tax year to claim the employment allowance for that tax year. Tax years which are still in time are shown below.

When considering a claim for a previous year, remember to check the conditions applying for that year. As explained above, changes have been made to the employment allowance in recent years.

Further information

• Employment Allowance: What you'll get