Will your employment allowance run out?

Employment allowance

While all employers have had to survive the double whammy of paying 15% employers’ NI on earnings above £96 per week (£5,000 p.a.) since 6 April 2025, the pain is alleviated by the employment allowance (EA) which is available to most employers. Hiding under the radar, an EA claim silently reduces the NI payable by £10,500 for 2025/26.

Claims

The EA isn’t applied automatically so you have to claim it by ticking the box on an employer payment summary. Claims don’t automatically roll forward each year either, so check the 2025/26 EA indicator/field in your software is marked “Yes”.

Although one-person companies, where the director is the sole employee, are ineligible, taking on (even temporarily) another employee who is paid more than £96 for just a single week will give access to a full year’s EA. A claim made mid-year still entitles you to the full EA which will offset any prior employers’ NI paid, leading to a credit on your PAYE account which could be refundable.

How it works

Each time the payroll is run, a chunk of the EA is used up until it runs out. This means it is not evenly spread throughout the tax year which can lead to a hefty NI bill when you least expect it.

Example. Sue runs a pre-school, employing ten part-time workers. The employers’ NI of £1,050 per month is covered by the EA but this will be used up by January 2026. She will see a sudden increase of £1,050 in her monthly NI bill for February and March.

Softening the blow

Half the battle is knowing if, and when, the EA will be extinguished. Your payroll software should note how much of the EA you have used this year. Check now so you can factor it into your budget for the rest of the tax year.

Eligible employers should also ensure they have claimed the EA in the last four tax years back to 2021/22. Due to changing thresholds, the EA is worth £5,000 in each of the years 2022/23 to 2024/25, and £4,000 for 2021/22.

You can request a refund from HMRC where the resulting employers’ NI rebate exceeds any outstanding PAYE, VAT or corporation tax liabilities.

Delay tactics

If you can’t reduce the amount payable, delaying the payment could give you some much needed breathing space.

Employers whose average monthly PAYE is below £1,500 can arrange to pay their PAYE/NI quarterly, i.e. NI payable for January to March would be delayed until 22 April, by calling HMRC on 0300 200 3401. Delay pay rises and bonuses until after 5 April 2026, so you aren’t increasing the NI bill even further. A longer-term solution is to offer pension contributions in lieu of extra salary as these escape NI.