Employment allowance for 2026-27

The allowance

Amount for 2026-27

£10,500 (GOV.UK: rates and thresholds)

Set against

Employer Class 1 National Insurance, each pay run until used or the year ends (GOV.UK)

How claimed

Yes in the employment allowance indicator on the EPS (GOV.UK: how to claim)

Claims for past years

Up to the previous 4 tax years (GOV.UK: past years)

Who can claim

HMRC's eligibility guidance says businesses and public bodies can claim if they do less than half their work in the public sector. Charities, including community amateur sports clubs, can claim, as can employers of care or support workers.

The £100,000 limit on the previous year's employer National Insurance was removed from 2025-26 onwards. It still applies to claims for 2024-25 and earlier (GOV.UK: past years).

Exclusions from the allowance

• A company whose only director is the only employee paid above the secondary threshold. CWG2 2026 to 2027 puts it as companies with one employee paid above the secondary threshold where that employee is the director. The secondary threshold for 2026-27 is £5,000 a year (GOV.UK).
• Domestic employers, such as for a nanny or gardener, unless the worker is a care or support worker (GOV.UK).
• Public authorities, unless a charity (CWG2).
• Workers under the off-payroll working rules, and deemed payments by service companies (GOV.UK; CWG2).
• More than one company in a connected group: only one can claim, and only against one payroll (GOV.UK).

Claiming

1. Check eligibility each year

   The allowance is claimed every tax year, at any time in the year. The earlier the claim, the sooner it is used (GOV.UK: when to claim).

2. Set the indicator on the EPS

   In payroll software, put Yes in the employment allowance indicator on the next EPS (GOV.UK: how to claim).

3. Answer the state aid question for past years

   In HMRC's Basic PAYE Tools, a claim for a previous year asks whether de minimis state aid rules apply and which sectors. HMRC says to choose Industrial/other unless the rules apply differently (GOV.UK).

4. Stop when no longer eligible

   Select No in the indicator on the next EPS (GOV.UK).

How it reduces the payments

The allowance is taken off the employer Class 1 due in each tax month until it runs out. For example, a company with five staff owes £1,800 of employer Class 1 a month in 2026-27. It claims on the first EPS of the year. Months 1 to 5 use £9,000 of the allowance, month 6 uses the remaining £1,500 and the company pays £300 of employer Class 1 that month, then the full £1,800 from month 7.

The employer's HMRC online account shows how much of the allowance has been used at any time (GOV.UK: when to claim).

Claims for earlier years

HMRC's past-years guidance allows claims for the previous 4 tax years. The allowance was £10,500 for 6 April 2025 to 5 April 2026 and £5,000 a year for 6 April 2022 to 5 April 2025. For 2024-25 and earlier the employer's Class 1 liability for the previous year must have been less than £100,000.

Questions