By the Renewminder Talent team · Updated 20 October 2026
Employment Allowance lets eligible employers reduce their employer Class 1 National Insurance by up to £10,500 a year (2026 to 2027). Most businesses and charities can claim, but not a company whose only employee paid above the secondary threshold is its director, and you can't include domestic staff or workers inside the IR35 rules. You claim through your payroll software or HMRC's Basic PAYE Tools. For one full-time employee on the minimum wage, it can cover the whole employer NI bill of about £2,968.
How it works
You pay less employer Class 1 National Insurance each time you run payroll, until the £10,500 is used up or the tax year ends, whichever comes first. You can still claim if your bill is less than £10,500.
Who can claim
- Businesses, and public bodies that do less than half their work in the public sector.
- Charities.
- Employers of care or support workers.
- A single-director company, as long as the director isn't the only employee liable for secondary Class 1 National Insurance.
- From April 2025, employers paying more than £100,000 in Class 1 National Insurance can apply.
Who and what you can't include
- Someone you employ for personal, household or domestic work, like a nanny or gardener, unless they're a care or support worker.
- Anyone whose earnings fall within the IR35 off-payroll working rules.
- More than one company in a group of connected companies or charities.
- More than one payroll.
How to claim
In your own payroll software, put 'Yes' in the Employment Allowance indicator on your next Employer Payment Summary (EPS). In HMRC's Basic PAYE Tools, choose the employer, select Employment Allowance, check the eligibility and send your EPS as normal.
A worked example
One full-time employee on the National Living Wage (£12.71 an hour, 37.5 hours a week) earns about £24,785 a year. Employer National Insurance is 15% above £5,000, about £2,968. Employment Allowance can cover all of it, so the yearly cost falls from about £28,309 to £25,341: about £2,112 a month instead of £2,359.
A full-time Renewminder Talent assistant is £1,250 a month, with no National Insurance on your side. Compare them.
Sources
Checked 20 October 2026. Rules change, so check the source before you rely on it.
Quick answers
How much is Employment Allowance for 2026 to 2027?
Up to £10,500 off your employer Class 1 National Insurance for the tax year.
Can a one-person limited company claim Employment Allowance?
Not if the director is the only employee liable for secondary Class 1 National Insurance.
Can charities claim Employment Allowance?
Yes.
How do I claim Employment Allowance?
Set the Employment Allowance indicator to 'Yes' on your next Employer Payment Summary in your payroll software, or use HMRC's Basic PAYE Tools.
Does Employment Allowance apply to workers inside IR35?
No. You can't include someone whose earnings fall within the IR35 off-payroll working rules.