Employer National Insurance is 15% of each employee's pay above £5,000 a year in 2026/27, so it adds up quickly for a small business. Employment Allowance takes the first £10,500 of it off the bill each tax year. You have to claim it, every year, and some employers and some employees are excluded. This post covers the amount, the rules from GOV.UK, how to claim and how far back you can go.
How much is Employment Allowance in 2026/27?
£10,500 for the 2026/27 tax year (6 April 2026 to 5 April 2027), the figure on HMRC's rates and thresholds page for employers. It comes off your employers' 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 for the year is less than £10,500; you just use less of it.
| Item | Weekly | Monthly | Yearly |
|---|---|---|---|
| Secondary threshold | £96 | £417 | £5,000 |
| Employer rate above the threshold (category A) | 15% | 15% | 15% |
| Employment Allowance | Up to £10,500 |
What that covers in practice: an employee paid £30,000 a year costs about £3,750 in employer National Insurance ((£30,000 − £5,000) × 15%). Two such employees cost about £7,500, inside the allowance. The allowance covers employer NI only: the employee's own National Insurance, 8% between £12,570 and £50,270 a year, is deducted from their pay as usual.
Who can claim Employment Allowance?
GOV.UK says you can claim for the current tax year if you're a business or public body and you do less than half your work in the public sector, such as for local councils and NHS services. Charities, including community amateur sports clubs, can claim, and so can someone who employs a care or support worker, for example to care for a person with a physical or mental disability.
Since April 2025 the size limit has gone: employers paying more than £100,000 in Class 1 National Insurance can apply. The rules for earlier years are different, so a backdated claim may still meet the old limit.
Who can't claim, and which employees don't count
| Situation | What GOV.UK says |
|---|---|
| Company with one director | The director must not be the only employee liable for secondary Class 1 National Insurance |
| Mostly public-sector work | You must do less than half your work in the public sector |
| Nanny, gardener or other household staff | Can't be included, unless they're a care or support worker |
| Workers under the IR35 off-payroll rules | Their earnings can't be included |
| Group of connected companies or charities | Only one company in the group can claim |
| More than one PAYE payroll | You can claim against one payroll only |
The single-director rule catches most one-person limited companies. If the director is the only person on the payroll paid above the secondary threshold, the company can't claim. Once another employee is also liable for secondary Class 1 National Insurance, it can. Our page on payslips for company directors covers the director's own payslip.
How to claim Employment Allowance
You claim through your Employer Payment Summary (EPS), the monthly return payroll software sends to HMRC for adjustments. There is no separate form.
- In payroll software: put "Yes" in the Employment Allowance indicator field the next time you send an EPS.
- In HMRC's Basic PAYE Tools: choose the employer from the Employer menu on the home page, select Employment Allowance, check the eligibility criteria, then send your EPS as normal.
- If your software has no EPS field for it, use Basic PAYE Tools for the claim.
- Claim again every tax year. GOV.UK says you can claim at any time in the year, but the earlier you claim, the sooner you get it.
- Check how much you've used in your HMRC online account.
If you stop being eligible, send "No" in the indicator on your next EPS. Don't send "No" just because you've used the full £10,500 or no longer employ anyone: neither makes you ineligible. Stopping a claim before 5 April removes any allowance you've had that year, and you then owe the employer National Insurance it covered.
Can you backdate an Employment Allowance claim?
Yes. GOV.UK says you may be able to claim for the previous 4 tax years, back to the 2021/22 tax year. When claiming for an earlier year, you answer whether the de minimis state aid rules apply to your business and, if they do, pick your business sector; most businesses choose "Industrial/other".
If you claim late in the current year and don't use the allowance against your employer National Insurance, you ask HMRC either to use the unclaimed amount against other tax you owe, including VAT and Corporation Tax, or to refund it after the tax year ends. You can't get a refund of the gap between your actual employer NI bill and the full £10,500.
Where PayDocs fits
Employment Allowance doesn't change anything on an employee's payslip, because it reduces the employer's National Insurance, not the employee's. PayDocs makes the payslip from your payroll figures. PayDocs works out PAYE income tax, National Insurance and supported deductions for 2026/27 pay dates. It doesn't send FPS or EPS returns to HMRC, so you claim the allowance through your payroll software or Basic PAYE Tools. The free National Insurance calculator shows employee and employer NI for a pay period, which tells you how quickly the allowance will be used.
This is general information about the rules for employers in the UK, not tax or legal advice.
Questions
How much is Employment Allowance for 2026/27?
Up to £10,500 off your employers' Class 1 National Insurance for the tax year from 6 April 2026 to 5 April 2027. It applies each payroll run until the £10,500 is used or the year ends.
Can a company with one director claim Employment Allowance?
Only if the director isn't the only employee liable for secondary Class 1 National Insurance. A company whose sole director is the only person paid above the secondary threshold can't claim.
Can I claim Employment Allowance for a nanny?
No. GOV.UK says employees for personal, household or domestic work, like a nanny or gardener, can't be included, unless they're a care or support worker.
Do I have to claim Employment Allowance every year?
Yes. You claim it each tax year by setting the Employment Allowance indicator on an EPS in your payroll software, or through Basic PAYE Tools.
Can I backdate an Employment Allowance claim?
You may be able to claim for the previous 4 tax years, back to 2021/22. For earlier years you also answer whether the de minimis state aid rules apply to your business.
Does Employment Allowance change the employee's payslip?
No. It reduces the employer's National Insurance only. The employee's own National Insurance is still deducted from their pay and shown on the payslip as usual.
Sources
- GOV.UK: Employment Allowance
- GOV.UK: Employment Allowance, check if you're eligible
- GOV.UK: Employment Allowance, when to claim
- GOV.UK: Employment Allowance, how to claim
- GOV.UK: Rates and thresholds for employers 2026 to 2027
Sources checked 7 October 2026. This article explains how pay documents work; it is not tax or legal advice.
