Is your business claiming the Employment Allowance?

Many businesses may be losing out on up to £10,500 by not claiming their National Insurance (NI) Employment Allowance. With employer NI contribution rates now at 15%, the savings are more valuable than ever. However, the allowance isn’t applied automatically - employers must actively claim it.

What is the Employment Allowance?

The Employment Allowance enables eligible businesses, charities, and public bodies (where less than 50% of work is in the public sector) to reduce their annual NI liability.

• Employers can currently save up to £10,500 per year.
• To qualify, a business must have at least one employee (who is not the sole director) earning above the secondary threshold of £5,000 per year. There is no minimum NI contribution requirement to claim the allowance.

Until recently, the allowance was restricted for employers with large NI liabilities, but significant changes now make it more widely accessible.

Key changes from April 2025

From April this year, the rules changed:

• The previous cap preventing large employers from accessing the allowance was removed. Employers with more than £100,000 in NI liabilities are now eligible to claim.

This represents a major opportunity for mid-sized and larger businesses that were previously ineligible.

Why now could be the perfect time to check

We are now at the midpoint of the tax year , which makes this an ideal time for employers to review their position. Many businesses that were previously excluded are now eligible - and some aren’t yet aware.

Payroll and finance teams should:

1. Check eligibility under the revised rules.
2. Confirm whether the allowance has already been claimed.
3. Take action through payroll software or HMRC if not.

Failing to do so could mean leaving thousands of pounds “on the table” unnecessarily.

Beware of connected company rules

One common pitfall to be aware of relates to connected companies. HMRC rules state:

• Only one company within a group of connected companies can claim the allowance in any tax year.
• This applies even if the companies stop being connected during the year.

We often see businesses mistakenly assume that each employer can claim independently. This not only risks incorrect claims but also potential HMRC penalties. To avoid issues, groups of companies should coordinate internally and decide which single entity will make the claim.

We’re here to help

The Employment Allowance represents a significant opportunity to reduce National Insurance costs, especially with today’s higher employer contribution rates. As it’s not automatic, businesses must claim it, and they must get it right. By acting proactively, employers can ensure they don’t miss out on up to £10,500 in annual savings.

Our payroll and employment tax specialists can support you with reviewing your National Insurance position, confirming eligibility and processing your claim. Get in touch today.