Don’t Miss the Increased £10,500 Employment Allowance for 2025/26

The Employment Allowance is a powerful relief that can reduce your employer National Insurance bill by up to £10,500 in the 2025/26 tax year. It’s straightforward, effective, and under the right circumstances – completely transformative for small and growing businesses. Yet, many employers either don’t claim it or don’t claim it correctly.

Whether you’re just starting out or reviewing your existing setup, here’s what you need to know to ensure you’re not missing out. And if you’d prefer someone else to take care of it? That’s where BePayroll comes in.

What Is the Employment Allowance?

The Employment Allowance allows eligible employers to reduce their annual Class 1 National Insurance contributions (NICs) bill – up to £10,500 from April 2025.

The relief is applied automatically through the payroll system as a deduction against the employer NIC due each time you run payroll – until the full allowance is used up.

Who Can Claim?

The Employment Allowance is broadly available, including:

• Limited companies with more than one employee or director where at least one is not a director
• Sole traders and partnerships with staff on payroll
• Charities and community amateur sports clubs
• Individuals employing care or support workers (such as carers under direct employment)

However, some employers are excluded, such as:

• Public authorities (unless they are also charities)
• Companies whose only employee is also the sole director
• Employers of off-payroll workers (contractors caught by IR35)
• Employers of domestic workers (e.g. nannies, cleaners, gardeners) — unless the worker is a care or support worker

Additional restrictions:

• If your business runs more than one PAYE scheme, the allowance can be claimed against only one.
• If your business is connected to other companies (e.g. in a group), only one company in the group can claim the allowance per tax year.

What’s New for 2025/26?

Increased allowance: Up from £5,000 to £10,500

No more de minimis state aid restrictions: This simplification makes it easier for businesses previously constrained by EU rules to claim the full benefit.

Wider eligibility: Previously excluded larger employers may now qualify, depending on their NIC liabilities and structure.

Can I Backdate a Claim?

Yes – you have four years from the end of the relevant tax year to submit a claim. That means it’s still possible to backdate claims for:

If your business missed out, especially in earlier years due to eligibility confusion or structural changes, it’s worth checking again.

Let BePayroll Handle It For You

If you’re unsure whether you qualify, how to claim, or how to reflect the allowance accurately in your payroll software – we can help.

At BePayroll, we support employers across the UK with:

• Claim reviews and backdated claims
• Optimised payroll processing to apply the allowance properly
• Structuring your payroll to ensure compliance and maximum relief
• Avoiding common pitfalls, like the “one-director-only” trap

Don’t leave money on the table – let us make the Employment Allowance work for you.

Want to find out if your business qualifies or how much you could save? Get in touch with BePayroll – we’ll make it easy.