If you run payroll and pay employer National Insurance, there's £10,500 sitting on the table for 2026-27. The Employment Allowance knocks that amount straight off your employer Class 1 NIC bill, and from April 2025 the rules changed so that thousands more businesses can claim it. Plenty still aren't.
TL;DR: The Employment Allowance for 2026-27 is £10,500, set against your employer Class 1 National Insurance. The old £100,000 cap is gone, so larger employers can now claim. Single-director companies with no other staff still can't. You claim through payroll by submitting an Employer Payment Summary, and you can backdate up to four years.
What Is the Employment Allowance for 2026-27?
The Employment Allowance lets eligible employers reduce their annual employer Class 1 National Insurance by up to £10,500 in 2026-27 (GOV.UK, 2026). It isn't a cash payment. You simply stop paying employer NIC each time you run payroll until the £10,500 is used up, or the tax year ends, whichever comes first.
It only offsets the employer's secondary Class 1 contributions. It does nothing for employee NIC, PAYE income tax, or Class 1A on benefits. The employer rate has sat at 15% since 6 April 2025, and the secondary threshold (the point where you start paying) is frozen at £5,000 a year until 2030-31 (Moorepay, 2026). A frozen threshold means a rising bill as wages grow, which makes the allowance worth more each year.
Larger Employers Can Claim for the First Time
This is the change most businesses have missed. Until April 2025, any employer whose employer Class 1 NIC bill topped £100,000 in the previous tax year was locked out of the Employment Allowance entirely. That restriction has been removed (GOV.UK, 2026).
For 2025-26 and 2026-27, every eligible employer can claim regardless of payroll size. A business that paid £250,000 in employer NIC last year and got nothing now takes £10,500 off. The de minimis state aid rules went at the same time, so the Employer Payment Summary no longer asks the sector and state-aid questions that used to trip people up (CIPP, 2025). In our experience, the firms most likely to overlook this are exactly the ones that were excluded for years and assumed nothing had changed.
Who Can't Claim the Employment Allowance?
A limited company can't claim if its only employee paid above the £5,000 secondary threshold is also a director. That's the single-director rule, and it catches a lot of contractor and personal-service companies (GOV.UK NIM06545, 2026).
There's a workaround that's entirely legitimate: if the company takes on a second person, even briefly, and pays them enough to trigger employer NIC, it can qualify (ICAEW, 2025). Two other groups are out: public bodies doing work of a public nature, and businesses where more than half the work is for the public sector. If your company is connected to others under common control, only one company in the group can claim, so decide which one before anyone submits.
How Much Could You Actually Save?
For most small employers, the £10,500 wipes out the bill completely. Take a company with three staff each on £28,000. Employer NIC per person is (£28,000 - £5,000) × 15%, which is £3,450. Across three employees that's £10,350, fully covered by the allowance, leaving the employer paying nothing.
One question clients always ask is whether the freeze on the £5,000 threshold matters. It does. The secondary threshold dropped from £9,100 to £5,000 on 6 April 2025, so far more of each salary now attracts the 15% charge (British Business Bank, 2026). That pushed up employer NIC bills across the board. The allowance offsets part of that increase, but once your bill runs past £10,500 you pay the rest at the full rate. For employer-cost planning around wages, our cash flow management guide is a useful companion.
Claiming the Allowance: EPS and Backdating
You claim the Employment Allowance through your payroll software by submitting an Employer Payment Summary to HMRC. You have to make the claim every tax year; it doesn't roll over automatically, and that's the step most businesses forget. What we see most often is a company that claimed once, switched software, and quietly stopped.
You can claim at any point in the tax year, and if you start late, HMRC applies the unused allowance against earlier months. Missed it in prior years? You can backdate a claim up to four tax years, which means a 2026-27 claim can reach back to 2022-23 (GOV.UK, 2026). That can be a meaningful sum for an employer who never realised they qualified. Getting your wider year-end payroll housekeeping right at the same time avoids the usual scramble.
Frequently Asked Questions
Is the Employment Allowance still £10,500 for 2026-27?
Yes. The allowance is £10,500 for 2026-27, the same level set from April 2025. It reduces your employer Class 1 National Insurance, not your PAYE or employee NIC.
Can a single-director company claim the Employment Allowance?
No, not if the director is the only person paid above the £5,000 secondary threshold. If the company employs at least one other person paid enough to trigger employer NIC, it can qualify for that year.
Do larger employers qualify now?
Yes. The £100,000 prior-year NIC restriction was removed from April 2025. For 2025-26 and 2026-27, every eligible employer can claim regardless of how large their payroll is.
How do I claim the Employment Allowance?
You claim it through your payroll software by sending an Employer Payment Summary to HMRC. You must claim each tax year, and you can backdate a claim for up to four previous tax years.
Does the Employment Allowance reduce my Class 1A NIC on benefits?
No. It only offsets employer secondary Class 1 NIC on earnings. Class 1A on benefits in kind, reported on the P11D, sits outside the allowance.
Not sure whether your company qualifies, or whether you've been claiming the full £10,500? Get in touch and we'll review your payroll setup, check your eligibility, and look at whether a backdated claim is worth filing. Our payroll and accounting team works with employers across the UK.