As your accountants and tax advisors here at LWA, we want to ensure that every client is making full use of the Employment Allowance, which has increased significantly for the 2025/26 tax year and could now reduce your Employer National Insurance Contributions (NICs) by up to £10,500.
Here's what you need to know.
What is the Employment Allowance?
The Employment Allowance is a government incentive designed to reduce the cost of employing staff by cutting your Employer NIC liability (the contribution your business pays, not your employees).
The saving is applied through your payroll software, so you’ll benefit in real-time by paying less to HMRC each month until the allowance is used up or the tax year ends.
Which types of businesses can claim the Employment Allowance?
Most employers including limited companies, charities and those employing care or support workers are eligible to claim. However, there are a few exceptions:
- You cannot claim if your company only has one employee who is also a director.
- Employers of nannies, gardeners or household staff aren’t eligible (unless the individual is a care or support worker).
- Public bodies doing more than 50% public sector work are not eligible – though charities are an exception to this.
If your business is connected to other companies (for example, under a group structure), you can only make one claim across the group. If this applies to you, we recommend checking with our tax team to determine how the rules affect your eligibility.
How has the Employment Allowance changed for the 2025/26 tax year?
From April 2025, several updates have made the Employment Allowance even more attractive:
- The maximum allowance has more than doubled, rising from £5,000 to £10,500.
- Previous restrictions affecting larger employers have been lifted, meaning more companies can now benefit.
- It no longer counts as de minimis state aid, simplifying the process for many businesses and removing the need to track previous state support.
Can you claim Employment Allowance for previous years?
Yes, you can backdate an Employment Allowance claim for up to four tax years. So, if your business was eligible in previous years but didn’t claim, it’s still possible to recover that money.
For example, you have until 5th April 2026 to make a claim for the 2021/22 tax year.
Be aware that the eligibility rules vary slightly between tax years, so do get in touch with our team for bespoke advice before submitting a retrospective claim.
LWA are here to help you claim Employment Allowance
If your business is growing or your employment arrangements have changed recently, it’s well worth reviewing your eligibility. A £10,500 reduction in your NIC bill could make a huge difference to your business’s cashflow, so it’s vital to check you’re making the most of it.
As always, the team here at LWA are happy to assist. Whether you’d like us to review your eligibility, amend your payroll settings, or help you make a retrospective claim, we’re here to support you.
Contact our Corporate Tax Team for advice on maximising tax reliefs like the Employment Allowance.
Contact our Payroll Services Team if you’re looking for help to manage your payroll and pension liabilities.
Give us a call on 0161 905 1801 in our Manchester office or call 01925 830 830 for our Warrington tax team. You can also send us an email to mail@lwaltd.com with ‘Employment Allowance query’ in the subject field.