Managing payroll as an employer can feel complicated, but the Employment Allowance is a valuable relief that can significantly reduce your costs. Here’s everything you need to know for the 2025/26 tax year.
What Is the Employment Allowance?
- It’s a government relief that helps businesses and charities reduce their employer National Insurance (NI) contributions.
- For 2025/26, you can save up to £10,500 per year.
- The allowance is automatically applied against your monthly/quarterly employer NI liabilities once claimed.
What Changed in 2025/26?
The limit increased
- From £5,000 to £10,500 (effective 6 April 2025). The £100,000 cap was removed
- Previously, if your employer NI bill in the previous tax year exceeded £100,000, you couldn’t claim.
- From 2025/26, larger businesses can also qualify.
Who Can Claim?
✅ Eligible:
- Businesses that pay employer Class 1 National Insurance on employees’ wages.
- Charities and community amateur sports clubs (CASCs).
- Companies with more than one director earning above the Secondary NI threshold (so they are not classed as “single-director companies”).
❌ Not Eligible:
- Companies where the only paid worker is a single director.
- Public sector employers carrying out the majority of their work in the public sector (with some exceptions).
How to Claim the Employment Allowance
You can normally claim via:
- Payroll software
- Or HMRC’s Basic PAYE Tools
But instead of dealing with the process yourself, you can let Sadler & Frost handle the entire claim on your behalf.
✅ We check your eligibility (including tricky multiple-director rules).
✅ We set up and submit the claim correctly through HMRC systems.
✅ We monitor your allowance throughout the year to make sure you get the full £10,500 benefit.
Example Scenarios
Example 1:
- Employer NI liability: £8,000
- Employment Allowance: £10,500
➡ Employer pays £0 NI
Example 2:
- Employer NI liability: £15,000
- Employment Allowance: £10,500
➡ Employer pays £4,500 NI
Conclusion
The Employment Allowance is more generous than ever in 2025/26. With the cap lifted and the relief increased to £10,500, both small businesses and larger employers stand to benefit. However, eligibility rules — especially around single vs. multiple directors — can be tricky.
That’s where we come in. At Sadler & Frost, we ensure your claim is accurate, compliant, and maximised.
Key Takeaways
- £10,500 annual allowance from April 2025.
- Cuts your employment costs by up to £10,500.
- £100,000 employer NI cap removed — larger businesses are now eligible.
- Single-director companies (with no other qualifying staff) remain excluded.
- Multiple directors can qualify if more than one earns above the NI threshold.
- Encourages small and medium businesses to hire more staff.
- Helps improve cash flow throughout the tax year.
- Claim easily with expert support from Sadler & Frost.
👉 Don’t leave money on the table — make sure your company doesn’t miss out. Contact Sadler & Frost today to secure your Employment Allowance claim — we’ll handle the process for you, ensure compliance, and maximise your full entitlement.
