The £10,500 Employment Allowance Is Now Open to All Employers: How BrightPay Ensures Every Eligible Client Claims It

With employer National Insurance Contributions now charged at 15% on earnings above £5,000, the Employment Allowance is worth more than at any point in its history. The removal of the £100,000 NIC eligibility cap from April 2025 means that almost every employer with two or more employees can now claim up to £10,500 off their annual employer NIC bill — yet a significant number of eligible businesses are still not claiming. Payroll software such as

BrightPay automates the Employment Allowance claim through the payroll run, ensuring every qualifying client captures the relief without additional manual steps.

The Employment Allowance has existed since 2014, but changes to its scope and value mean that practices and bureaus should be treating it as an active annual review item for all employer clients — not an occasional check. At 15% employer NIC on earnings above £5,000, the saving from a full Employment Allowance claim in 2026/27 is worth up to £10,500 per employer. For a business paying five employees at the National Living Wage, that relief eliminates a substantial portion of the employer NIC bill entirely.

The two most common reasons eligible employers are not claiming are: not knowing the cap was removed, or not realising they need to re-claim each tax year. Both are straightforward to address.

This blog is part of our series on Payroll Compliance 2026/27: Payrolling Benefits, Rates & Rules.

Who Can Now Claim and Who Cannot

The Employment Allowance is available to employers who have a Class 1 National Insurance liability in the tax year, provided at least one employee — other than a sole director — is paid above the secondary threshold. The removal of the £100,000 employer NIC liability cap from April 2025 means there is no longer an upper threshold based on the size of the employer’s NIC bill.

Eligible employers include: Businesses with two or more employees where at least one worker (other than a sole director) earns above the Class 1 secondary threshold — currently £5,000 per year. Charities and community amateur sports clubs. Businesses of any size, including those with employer NIC bills well above £100,000.

Employers who cannot claim: Companies where the sole employee is also a director. Connected companies — those under common control — can only claim the allowance once between them, not once per entity. Employers whose NIC liability is wholly in respect of a domestic carer or support worker in a personal household are also excluded. Public bodies and those that carry out functions of a public nature are ineligible.

The key practical implication for practices is that many clients who were previously excluded because their NIC bill exceeded £100,000 are now eligible. A manufacturing business, a care home operator, or a professional services firm with fifty employees should now be claiming — if they are not, the practice is leaving money on the table for them.

The Annual Claim Requirement

The Employment Allowance is not a one-and-done registration. It must be claimed each tax year by submitting an Employer Payment Summary (EPS) that includes the Employment Allowance claim indicator. The allowance then offsets against employer NIC as it arises in each payroll run until the full £10,500 has been used or the tax year ends.

For bureaus running payroll for multiple employer clients, the beginning of each tax year should include an Employment Allowance eligibility review for every client. Clients who were eligible in the prior year are almost certainly still eligible — but circumstances can change, and the claim must be active for the allowance to apply.

If a client’s payroll goes live part-way through the year, the claim can still be submitted and the full annual allowance is available regardless of when in the year the EPS is filed, up to the end of the tax year.

Looking for further information on legislation? Check out our blogs on Student Loan Plan 5 Starts April 2026: How BrightPay Keeps Every Deduction Correct, Electric Vehicles and Salary Sacrifice: How BrightPay Helps Employers Set Up a Compliant, Tax-Efficient Scheme and Statutory Pay Rates 2026/27: How BrightPay Keeps Every SSP, SMP and SPP Calculation Correct.

How BrightPay Applies the Employment Allowance

In BrightPay, the Employment Allowance is activated within the employer’s settings. Once enabled, BrightPay automatically applies the allowance against employer NIC in each payroll period, reducing the NIC payment due to HMRC until the £10,500 annual limit is reached. The EPS submission confirming the claim is generated and filed through BrightPay’s RTI submission workflow.

The Commercial Impact on Clients

At 15% employer NIC, a full £10,500 Employment Allowance claim saves the employer the equivalent of £70,000 of employment cost above the secondary threshold. For a business with five employees earning £30,000 each, employer NIC applies only to pay above the £5,000 secondary threshold — so total employer NIC is approximately £18,750 per year. The Employment Allowance reduces that to £8,250 — a saving of 56%.

For practices advising smaller employers, this is a straightforward point that should appear in any year-end or payroll review communication. For bureaus processing payroll, confirming the allowance is claimed is a service quality issue as much as a compliance one — a client whose allowance has lapsed through a missed annual claim has been overcharged on their HMRC payments throughout the year.

Frequently Asked Questions

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.