Employment Allowance allows eligible employers to reduce their annual National Insurance liability by up to £10,500.
You can only claim against your employers’ Class 1 National Insurance liability up to a maximum of £10,500 each tax year. You can still claim the allowance if your liability was less than £10,500 a year.
If you’re part of a group
If you’re part of a group of charities or companies (also known as connected companies), the total employers’ Class 1 National Insurance liabilities for the group must be less than £100,000.
If you have more than one payroll
If you have or had more than one employer PAYE reference, the total employers’ Class 1 National Insurance liabilities for your combined payrolls must be less than £100,000 in the previous tax year. You can only claim Employment Allowance against one of the payrolls.
Check if de minimis state aid rules apply to you
De minimis state aid rules are likely to apply to your business if both of the following are true:
- your business is located in Northern Ireland
- your business manufactures or sells goods or wholesale electricity
If you make or sell goods or services, Employment Allowance counts as ‘de minimis state aid’. There’s a limit to how much de minimis state aid you can get.
You must:
- check that you’re within the de minimis state aid threshold
- work out how much de minimis state aid you’ve received
You must do this even if you do not make a profit.
Check you are within the de minimis state aid threshold
- Employment Allowance counts towards the total de minimis state aid you’re allowed to get over a 3 year period.
- You must make sure you will not exceed the de minimis state aid threshold for your sector.
Work out how much de minimis state aid you’ve received
- Check if you’ve received any de minimis state aid – if so, you should have been told in writing.
- Add the total amount of de minimis state aid that you’ve received or been allocated for the current and past 2 tax years.
- Add this to the full amount of Employment Allowance for the year you’re claiming for. You’ll need to convert this into euros using the exchange rate for the end of the previous tax year. If you’re claiming for 2022 to 2023, you’ll need to use the exchange rate on 30 March 2022: £1 to €1.1826.
- If the total is below the threshold for your sector, you’re eligible to make a claim.
If you’re a connected company, the total de minimis state aid for all of the companies in the group must be below the state aid limit for your sector.
Who cannot claim Employment Allowance
You cannot claim if you’re a public body or business doing more than half your work in the public sector (such as local councils and NHS services) – unless you’re a charity.
You also cannot claim if both of the following apply:
- you’re a company with only one employee paid above the Class 1 National Insurance secondary threshold (2025/26 threshold is £96 per week, £416.66 per month, £5,000 per year)
- the employee is also a director of the company
Single-director companies not eligible for employment allowance
- Limited companies cannot claim Employment Allowance if they have just one director and that director is the only employee liable for secondary Class 1 National Insurance.
- This means that companies with several employees, where the director is the only employee paid above the Secondary Threshold, are not eligible for the Employment Allowance.
- This only applies to limited companies. If you’re self-employed, this does not apply to you.
Certain employees cannot be included in your claim, such as:
- someone whose earnings are within IR35 ‘off-payroll working rules’
- someone you employ for personal, household or domestic work (like a nanny or gardener) – unless they’re a care or support worker
The additional employee test
If your company circumstances change and more than one employee or director earns above the Secondary Threshold, you’ll be eligible for Employment Allowance for the whole tax year.
This includes companies where:
- all employees are directors where both earn above the Secondary Threshold
- the company employs husband and wife directors where both earn above the Secondary Threshold
- the company employs seasonal workers where one or more is an employee earning above the Secondary Threshold in a week
- where you’re the only UK based employee of an international company that meets the other eligibility criteria, and you earn above the Secondary Threshold in a week
The decisive factor is that the additional employee(s) must be paid above the Secondary Threshold. Directors must be paid above the annual Secondary Threshold or pro-rata if the directorship began after the start of the tax year.
Changes in the year
If your company has several employees paid above the Secondary Threshold, but your circumstances change during the tax year and the director becomes the only employee paid above the Secondary Threshold, you can still claim the Employment Allowance for the tax year. You should stop it for the following tax year, unless there are further changes to your circumstances and a further employee is taken on and paid above the Secondary Threshold.
If your company is no longer eligible to claim the Employment Allowance at the start of the tax year, you should stop your claim.
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