UK Employment Allowance 2026 Calculator
Check if your UK business qualifies for the £10,500 Employment Allowance (raised from £5,000 in April 2025) and calculate the employer secondary Class 1 NIC saving for 2026/27.
| Employment Allowance ceiling | — |
| Estimated employer NIC (gross) | — |
| Allowance applied | — |
| Net employer NIC payable | — |
What Is Employment Allowance?
Employment Allowance is a UK government relief that lets eligible employers reduce their annual secondary Class 1 National Insurance contributions (employer NIC) by up to £10,500 for the 2025/26 tax year onwards (raised from £5,000 in the Autumn Budget 2024). The relief is claimed through PAYE software (HMRC's Basic PAYE Tools or commercial payroll) and is offset against employer NIC liabilities throughout the year (source: GOV.UK Employment Allowance).
2025/26 changes: Two major changes from April 2025 — (1) the maximum allowance rose from £5,000 to £10,500, and (2) the £100,000 prior-year NIC cap was removed entirely. This means many medium-sized businesses that were previously excluded can now claim. Combined with the secondary NIC rate rising from 13.8% to 15% in April 2025 (and the secondary threshold falling to £5,000), Employment Allowance becomes a critical mitigation for SMB payroll costs.
Eligibility — Who Cannot Claim
Most UK employers qualify, but exclusions apply. (1) Single-director companies where the only employee paid above the secondary threshold is a director — explicitly excluded since 2016 to prevent personal NI tax avoidance. (2) Public sector bodies performing public-sector work (e.g. local councils, NHS trusts in their public function). (3) 50%+ public-funded charities for that public-funded portion. (4) Most state-aid de minimis ceilings have been replaced with a "tougher cap" for industries subject to UK subsidy control rules (e.g. agriculture, fisheries) — those sectors face additional limits. (5) Connected companies can only claim once across the connected group — pick the company with the highest NIC bill (source: HMRC single-director guidance).
How the £10,500 Saving Compounds
For a small business with annual employer NIC of £18,000, claiming the £10,500 Employment Allowance reduces net employer NIC to £7,500 — a 58% saving. For a business with annual NIC under £10,500, the entire bill is wiped out (any unused allowance does not roll over). For a hospitality business with employer NIC of £30,000, the £10,500 saving covers about 35% of the total bill but is still substantial relative to small-business margins. Combined with the secondary threshold change to £5,000 (down from £9,100 in April 2025), the cost-of-employment math has shifted significantly — this calculator reflects the new April 2025 regime.
How to Claim
(1) Use Basic PAYE Tools or commercial payroll software to flag "Yes" on the Employment Allowance question in your Employer Payment Summary (EPS). (2) The allowance is automatically applied against your monthly employer NIC liabilities through to £10,500. (3) If you fail to claim during the year, you can backdate up to 4 tax years via amended EPS. (4) If your business changes status (e.g. becomes single-director), notify HMRC immediately to avoid penalty-eligible underclaiming. (5) Connected-companies group nomination is filed once via your accountant's PAYE software.
For other UK SMB tax tools, see our corporation tax calculator, Class 4 NI calculator, dividend tax calculator, and marriage allowance transfer.
Last updated April 2026. Estimates only — verify your actual eligibility and NIC bill on gov.uk. The single-director exclusion and connected-companies rules have specific edge cases; consult an accountant for high-value claims. Sources: GOV.UK, HMRC.