Employment Allowance for 2025/26 – Are You Eligible?

Employer NICs are rising, but so is the support you can claim. If you're eligible for the 2025/26 tax year, changes to Employment Allowance could save your business more money. Here's what you need to know.

What’s New for Employment Allowance in 2025/26?

From 6 April 2025, the Employment Allowance has been updated to help employers manage rising National Insurance (NI) costs. Here’s what’s changed:

1. Allowance Doubled to £10,500

You can now reduce your employer NI bill by up to £10,500 per year - more than double the previous £5,000 limit. This could free up cash flow and ease pressure on your payroll costs.

2. £100,000 Cap Removed

In the past, if your NI liability was over £100,000, you couldn’t claim. That cap is now gone, so even larger small businesses that were previously excluded can now benefit.

3. Employer NI Rate Increased to 15%

The rate you pay on staff wages has gone up from 13.8% to 15%, increasing your employment costs, which makes the allowance more valuable than ever.

4. Lower Secondary Threshold

You now start paying NI when an employee earns just £5,000 a year (down from £9,100), meaning more of your staff costs are subject to NI, and more businesses will want to offset it with the allowance.

Employment Allowance Eligibility Rules for 2025/26 Explained

Not every business can claim Employment Allowance, but more employers now qualify thanks to the 2025/26 updates. Here's who can and can’t claim:

✅ Who Can Claim

You may be eligible if:

• You’re a business, charity, or community sports club

• You employ staff and pay Class 1 employer National Insurance

• You’re not a sole director company with no other employees

• You don’t employ someone for personal/domestic work unless they’re a care or support worker

• You’re not a public body (unless you're a registered charity)

Good news: If you were previously blocked because your employer NI bill was over £100,000 - that cap has been removed. You may now qualify.

❌ Who Can’t Claim

You’re not eligible if:

• You’re the only employee and also the director

• You employ someone like a nanny or cleaner unless they’re a care/support worker

• You’re a public body or do mostly public sector work (excluding charities)

• You’re part of a group - only one company or charity in the group can claim

• You run more than one PAYE scheme - you can only apply the allowance to one

What We Think

The allowance increase is helpful, but for many small businesses, it just covers the rising cost of NI, not much more. With rates up and the threshold lower, you start paying sooner, so the £10,500 often just keeps you from falling behind.

Removing the £100k cap is a good move. Growing businesses were unfairly excluded before, and now more can claim.

The real problem? Most people don’t know they’re eligible. HMRC’s guidance isn’t always clear, and unless someone points it out, it’s easy to miss the chance to claim.

If you’re not sure whether you qualify, it’s worth checking now. You could be missing out without even knowing it.

How JAFA Can Help

At JAFA, we don’t just handle your payroll - we help you make the most of it. Our platform keeps up with the latest tax changes, so if you’re eligible for employers NI allowance 2025/26, we’ll make sure it’s claimed properly.

Not sure if you qualify? We’ll check that for you. We turn confusing rules into clear answers, and we explain what matters in plain English.

Whether you’re a new employer or a growing business that’s now eligible for the first time, we’ll help you claim what you’re entitled to without the guesswork.

We also keep an eye on updates from each Employment Allowance budget, so you’re always a step ahead when the rules change.

Contact our expert accountants based in Birmingham, UK, either by booking a FREE discovery call or calling us on +44 121 227 6277.