Intro post:
Managing payroll as an employer can feel complicated, but the Employment Allowance is a valuable relief that can significantly reduce your costs. Here’s everything you need to know for the 2025/26 tax year.
What Is the Employment Allowance?
It’s a government relief that helps businesses and charities reduce their employer National Insurance (NI) contributions.
For 2025/26, you can save up to £10,500 per year.
The allowance is automatically applied against your monthly/quarterly employer NI liabilities once claimed.
What Changed in 2025/26?
The limit increased
From £5,000 to £10,500 (effective 6 April 2025). The £100,000 cap was removed
Previously, if your employer NI bill in the previous tax year exceeded £100,000, you couldn’t claim.
From 2025/26, larger businesses can also qualify.
Who Can Claim?
✅ Eligible:
- Businesses that pay employer Class 1 National Insurance on employees’ wages.
- Charities and community amateur sports clubs (CASCs).
- Companies with more than one director earning above the Secondary NI threshold (so they are not classed as “single-director companies”).
❌ Not Eligible:
- Companies where the only paid worker is a single director.
- Public sector employers carrying out the majority of their work in the public sector (with some exceptions).
How to Claim the Employment Allowance
You can normally claim via:
- Payroll software
- Or HMRC’s Basic PAYE Tools
But instead of dealing with the process yourself, you can let Sadler & Frost handle the entire claim on your behalf.
✅ We check your eligibility (including tricky multiple-director rules).
✅ We set up and submit the claim correctly through HMRC systems.
✅ We monitor your allowance throughout the year to make sure you get the full £10,500 benefit.
Example Scenarios
Example 1
Employer NI liability: £8,000
Employment Allowance: £10,500
➡ Employer pays £0 Employer’s NI
Example 2
Employer NI liability: £15,000
Employment Allowance: £10,500
➡ Employer pays £4,500 Employer’s NI
Conclusion
The Employment Allowance is more generous than ever for the 2025/26 tax year. With the allowance increased to £10,500 and the £100,000 Employer’s NI cap removed, both small businesses and larger employers can now benefit.
That said, eligibility rules — particularly around single vs. multiple directors — can be complex and mistakes can lead to rejected claims or HMRC issues.
That’s where we come in.
At Sadler & Frost, we make sure your Employment Allowance claim is accurate, compliant, and fully maximised.
Key Takeaways
• £10,500 annual Employment Allowance from April 2025
• Reduces your employment costs by up to £10,500 per year
• £100,000 Employer’s NI cap removed — larger employers now qualify
• Single-director companies (with no other qualifying staff) remain excluded
• Multiple-director companies may qualify if more than one director earns above the NI threshold
• Encourages businesses to hire and retain staff
• Improves cash flow throughout the tax year
• Claim easily with expert support from Sadler & Frost
⸻
👉 Don’t leave money on the table.
Make sure your business doesn’t miss out on the Employment Allowance.
Contact Sadler & Frost today — we’ll handle the claim, ensure full HMRC compliance, and maximise your entitlement.
