What is Employment Allowance in the UK and how much can you claim in 2026?

Employment Allowance is a valuable tax relief available to eligible employers in the UK. For the 2026/27 tax year, the maximum allowance remains at £10,500 per year. This financial support helps businesses reduce their National Insurance burden and makes a real difference to their bottom line.

This blog is part of a series on Celebrating National Payroll Week 2026: The Numbers Every Payroll Team Should Know.

What is Employment Allowance?

Employment Allowance is a relief against employer secondary Class 1 National Insurance Contributions. It allows eligible employers to reduce their annual National Insurance liability by up to £10,500 for the 2026-27 tax year. This maximum has remained in place since the 2025/26 tax year, when it was increased from the previous level of £5,000.

The allowance is calculated on a calendar year basis from the 6th o April each year (which is the start of each tax year). Any employer who pays secondary Class 1 National Insurance on their payroll may be able to claim. The allowance is deducted from the employer’s National Insurance liability each month or quarter, depending on how the employer submits their PAYE returns.

Who can claim Employment Allowance in the UK?

Almost every employer who pays secondary Class 1 National Insurance Contributions can claim Employment Allowance. This includes most businesses, charities, schools, universities, and Community Amateur Sports Clubs. The key requirement is that the employer must be paying National Insurance on employees’ earnings.

Charities and not-for-profit organisations are eligible provided they pay National Insurance on their staff’s wages. Care and support worker employers can also claim. The allowance applies regardless of business size or turnover. Even sole traders with a small number of employees can benefit.

Who cannot claim Employment Allowance in the UK?

Certain businesses are not eligible to claim. Businesses that undertake more than 50% of their work in the public sector cannot claim Employment Allowance. This restriction prevents public sector contractors from accessing relief on that portion of their income.

Connected companies and charities also face restrictions. If you operate multiple connected companies, only one company can claim the allowance in any given tax year. The same rule applies to connected charities. If you have more than one PAYE scheme, you can only claim the allowance against one scheme per year, regardless of how many PAYE schemes you operate.

How much Employment Allowance can you claim?

The maximum Employment Allowance for the 2026/27 tax year is £10,500. This has remained unchanged from the 2025/26 tax year rate. The actual amount you receive may be lower if your employer National Insurance liability is less than £10,500 in the tax year.

The allowance is applied against your secondary Class 1 National Insurance liability. If your liability is £8,000, you can claim £8,000. If it is £15,000, you can claim the maximum £10,500, saving £10,500 from that bill. The remaining £4,500 must be paid by the employer.

How can you claim Employment Allowance in the UK?

Claiming Employment Allowance is straightforward. You make your claim through HMRC online services or through your payroll software. Most employers claim through their payroll provider.

You can claim Employment Allowance from the start of the tax year or at any point during the year. The allowance is then offset against your monthly or quarterly National Insurance bills. If you use a payroll bureau or accountant, they can submit the claim for you. You simply need to provide authorisation and confirm your eligibility.

What are the deadlines for claiming Employment Allowance in the UK?

There is no deadline for claiming Employment Allowance during the current tax year. You can claim at any point from the 6th of April right through to the 5th of April the following year. However, you can only claim for the current and previous four tax years. If you wish to claim for an earlier year, you must make a claim within four years of the end of that tax year.

If you believe you have paid too much National Insurance in previous years because you did not claim Employment Allowance, you can backdate your claim. This backdate can go back four tax years.

Why should I claim Employment Allowance?

Employment Allowance provides direct financial relief to employers. For small employers, this saving can be used to invest in staff wages, training, or equipment. The allowance helps businesses manage their wage costs more effectively. It reduces the cost of employing staff and makes employment more affordable. For charities and not-for-profit organisations, the saving means more money can go directly toward their mission rather than paying National Insurance to HMRC.

How to Employment Allowance in your payroll software

Most modern payroll software systems can manage Employment Allowance claims automatically. Once you have claimed, the system will offset the allowance against your National Insurance liability each month. This is done transparently and clearly shown on your payroll reports.

Wondering how Employment Allowance works in BrightPay? In BrightPay, employers who are eligible for Employment Allowance must first submit an Employer Payment Summary (EPS) to notify HMRC of their eligibility. Once the EPS has been submitted and accepted by HMRC, employers enable the Employment Allowance claim by navigating to the HMRC utility and selecting Enable under the Employment Allowance Claim option. BrightPay will then automatically calculate the Employment Allowance in line with the employer’s Class 1 National Insurance liability each tax period, up to the maximum total of £10,500 per tax year. By claiming Employment Allowance via the EPS, HMRC will credit the PAYE account with the amount of Employer’s NIC per tax month up to the annual maximum.

Key points to remember

• Employment Allowance is available to most employers paying National Insurance

• The maximum relief for the 2026/27 tax year is £10,500

• You must be eligible and cannot be a business with more than 50% public sector work

• If you operate multiple PAYE schemes or connected companies, only one can claim per year

• The allowance is easy to claim through HMRC online or via your payroll provider

• Backdating is possible for up to four years if you have not claimed previously

Discover how BrightPay can help you manage your National Insurance and ensure you claim Employment Allowance if eligible below.

This content may have been developed with the assistance of AI tools. Content is reviewed by a member of the Bright team before publication. Guidance on legislation can be obtained from your industry body.