Employment Allowance Calculator
See how much employer National Insurance your business can save by claiming the Employment Allowance for 2026/27.
The Employment Allowance calculator calculates how much employer National Insurance a business can save by claiming the Employment Allowance. The Employment Allowance calculator requires inputs such as the total annual secondary Class 1 NI bill, the relevant tax year, and the business's eligibility status. The Employment Allowance calculator calculates potential savings by comparing the entered NI bill against the annual Employment Allowance, returning the lower of the two as the saving. The Employment Allowance calculator checks eligibility by confirming the previous year's NI bill was below the de minimis state aid limit and confirming the business is not a single-director company. The Employment Allowance calculator returns an accurate result when correct inputs are provided. The savings formula returns the lower value between the secondary Class 1 NI bill and the annual allowance. The Employment Allowance applies through payroll, reducing each month's employer NI payment to HMRC until the cap is reached.
Your NI Bill
Allowance Saving
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Estimates only — verify with HMRC or a qualified accountant.
The Employment Allowance is a government relief that allows eligible employers to reduce their annual secondary Class 1 NI bill by a fixed amount. For the tax year 2026/27, the Employment Allowance is set at £10,500. The Employment Allowance lowers employment costs for smaller businesses by decreasing employer NI liabilities. Employers can claim the Employment Allowance if their previous tax year's NI bill was below the de minimis state aid limit and they employ at least one person earning above the secondary threshold who is not the sole director. Employers can claim during the tax year and backdate up to four years. Single-director companies and businesses with prior-year NI bills exceeding the limit cannot claim. The Employment Allowance saves employers up to the annual cap, fully covering smaller bills and capping larger ones.
To claim the Employment Allowance, businesses use payroll software to select the Employment Allowance option on the Employer Payment Summary sent to HMRC. The Employment Allowance offsets the employer NI automatically until the allowance is fully used. The Employment Allowance applies on top of other employer savings, such as salary sacrifice schemes. The Employment Allowance fits within total employment costs by reducing employer NI, one of the added costs alongside salaries and pension contributions. To maintain accuracy for 2026/27, businesses reconfirm eligibility each tax year, use the current allowance value, and review prior-year NI liabilities and eligibility conditions before claiming.
What is the Employment Allowance calculator?
The Employment Allowance calculator is an online tool that calculates how much of an employer's secondary Class 1 National Insurance (NI) bill the Employment Allowance will cover. The Employment Allowance calculator requires three main inputs: the total annual employer secondary Class 1 NI bill, the tax year for which the calculation applies, and confirmation of the business's eligibility to claim the allowance. These three inputs align the calculation to the exact circumstances of the employer.
The Employment Allowance calculator outputs the employer NI saving for the year, capped at the annual Employment Allowance value. The Employment Allowance calculator displays the full employer NI bill when the bill is lower than the allowance, or the maximum allowance amount when the NI bill exceeds it. The Employment Allowance calculator output shows employers their National Insurance cost reduction.
How does the Employment Allowance calculator work?
The Employment Allowance calculator compares your secondary Class 1 National Insurance (NI) bill against the annual Employment Allowance and returns the lower of the two as your saving. The Employment Allowance calculator output shows an employer how much of their NI liability will be reduced for the tax year. The Employment Allowance calculator begins by confirming your eligibility, checking criteria such as not being a single-director company and having a prior-year NI bill below the de minimis state aid limit. After eligibility is confirmed, the Employment Allowance calculator takes your total employer NI for the year and offsets the allowance up to its annual cap, which is £10,500 for the 2025/26 and 2026/27 tax years.
The Employment Allowance calculator uses the selected tax year's allowance figure to produce an accurate result. When your total employer NI bill is less than the allowance value, the Employment Allowance calculator returns your full NI bill as the saving. When your NI bill exceeds the allowance, the Employment Allowance calculator returns the capped amount. The Employment Allowance calculator helps employers plan payroll costs by providing a reliable estimate of the savings achievable through the Employment Allowance.
How does the Employment Allowance Calculator check if you are eligible?
The Employment Allowance Calculator checks eligibility by confirming your previous year's employer Class 1 National Insurance bill was below the de minimis state aid limit and that your business is not a single-director-only company. The eligibility check prevents ineligible claims and supports compliance with HMRC rules. The Employment Allowance Calculator confirms that you employ at least one person earning above the secondary threshold who is not the sole director. The single-employee requirement matters because businesses that only employ a single director are excluded from claiming the Employment Allowance. The Employment Allowance Calculator uses these criteria so that only eligible employers receive an accurate saving calculation.
How Much Employer NI Will the Employment Allowance Save You?
£7,000 NI bill
£7,000
saved in full
£15,000 NI bill
£10,500
capped at the allowance
The Employment Allowance saving equals your secondary Class 1 NI bill up to the annual allowance value, which is £10,500 for 2026/27. The amount saved depends directly on your total employer National Insurance bill. When your NI bill is smaller than the allowance, you save your entire NI liability. When your bill exceeds the allowance, you save up to the cap, with the remaining balance payable to HMRC.
Three factors determine the amount saved: your total employer NI bill for the year, the annual allowance cap set by HMRC, and your eligibility to claim the allowance. An employer with an NI bill below the allowance saves the whole bill, and an employer with a larger bill saves up to the cap. For example, when your annual secondary Class 1 NI bill is £7,000, you save the full £7,000. When your bill is £15,000, you save £10,500, which is the maximum allowance for 2026/27. The Employment Allowance reduces the financial burden of hiring, and for smaller businesses the allowance can offset a large portion or all of the employer NI liability.
Is the Employment Allowance calculator accurate?
Yes, the Employment Allowance calculator is accurate when your total secondary Class 1 National Insurance (NI) bill, tax year, and eligibility are entered correctly. The Employment Allowance calculator uses these inputs to determine the amount of employer NI savings, comparing your NI bill against the annual Employment Allowance cap. The Employment Allowance calculator's precision relies on the accuracy of the figures you provide and the conditions set by HMRC.
The Employment Allowance calculator assumes you meet set eligibility criteria, such as not being a single-director company without other employees earning above the secondary threshold. The Employment Allowance calculator presupposes compliance with the de minimis state aid limit. Confirming that your eligibility aligns with these conditions produces a reliable result.
What is the formula to calculate the Employment Allowance saving?
The formula for calculating the Employment Allowance saving is the lower of your annual secondary Class 1 National Insurance (NI) bill or the annual Employment Allowance value. When your NI bill is less than the allowance, the entire bill is offset. When the bill exceeds the allowance, only the allowance amount is deducted.
Formula
Saving = lower of (Employer's NI bill, £10,500)
Key Terms Defined
Secondary Class 1 NI Bill
The secondary Class 1 NI bill is the total employer National Insurance paid on employees' earnings above the secondary threshold throughout the tax year.
Annual Allowance Value
The annual allowance value is the maximum Employment Allowance available for the given tax year, such as £10,500 for 2025/26.
Eligibility Condition
The eligibility condition requires employers to meet criteria such as not being a single-director company and having a previous year's NI bill below the de minimis state aid limit.
Worked Example
Consider an employer with an annual secondary Class 1 NI bill of £8,000 and an Employment Allowance of £10,500. The saving is £8,000, because the NI bill is less than the allowance. In a second scenario, when the NI bill is £15,000, the saving is capped at £10,500, and the employer pays the remaining £4,500. The Employment Allowance reduces the NI liability up to its set limit.
What counts as your secondary Class 1 NI bill?
Your secondary Class 1 NI bill is the total employer National Insurance you pay on all employees' earnings above the secondary threshold across the year. The secondary threshold is the point at which employers begin paying National Insurance contributions on each employee's earnings. Only employer secondary Class 1 National Insurance contributions count toward the secondary Class 1 NI bill. Employee NI contributions, which are deducted from workers' pay, do not form part of your secondary Class 1 NI bill. Other classes of National Insurance, such as Class 1A (on benefits in kind), Class 1B (on PAYE Settlement Agreements), or Class 2 and Class 4 contributions paid by the self-employed, are excluded.
To calculate your total annual secondary Class 1 NI bill, you can use the Employer National Insurance Calculator. The Employer National Insurance Calculator calculates employer NI contributions based on employee salaries, the applicable rate, and the secondary threshold for the tax year. Your secondary Class 1 NI bill lets you manage your payroll expenses and meet National Insurance obligations.
How is the allowance offset against your NI bill?
The Employment Allowance applies through payroll, reducing each month's employer National Insurance (NI) payment to HMRC until the annual allowance is fully used. Payroll software manages the offset automatically, applying the allowance against the employer's NI liability as the NI accrues.
Employers do not receive a separate refund. The Employment Allowance is deducted in real time from the NI payment obligations. Each payroll cycle applies a portion of the allowance to the secondary Class 1 NI bill until the cap is exhausted. After the allowance is depleted, the employer resumes normal NI contributions for the remainder of the tax year. The payroll offset improves cash flow by lowering monthly payments directly rather than requiring upfront payment and later reimbursement.
What Is the Employment Allowance?
The Employment Allowance is a financial relief mechanism that allows eligible employers to reduce their annual secondary Class 1 National Insurance (NI) bill by a fixed amount. The Employment Allowance lowers the cost of employer NI contributions and is claimed through the payroll system. The Employment Allowance reduces the amount of NI that businesses must pay, supporting smaller businesses, limited companies, and charities in managing payroll expenses. The Employment Allowance frees up cash flow that businesses can reinvest into growth and sustainability.
How Does the Employment Allowance Work?
The Employment Allowance offsets an eligible employer's secondary Class 1 National Insurance liabilities as reported through PAYE. The offset occurs automatically each time an employer submits the Employer Payment Summary to HMRC, continuing until the annual allowance is fully used. The Employment Allowance integrates within the regular payroll reporting cycle, applying consistently without separate claims or refund processes. Any portion of the Employment Allowance that remains unused at the end of the tax year does not carry over, so employers activate and use the allowance at the start of the tax year.
How Much Is the Employment Allowance for 2026/27?
The Employment Allowance for the 2026/27 tax year is set at £10,500. The 2026/27 allowance represents an increase from previous years, aimed at supporting smaller businesses by reducing National Insurance liabilities. The Employment Allowance applies to eligible employers, including businesses, charities, and public bodies that meet set criteria outlined by HMRC.
| Tax Year | Annual Allowance | Applies To |
|---|---|---|
| 2026/27 | £10,500 | Eligible employers |
| 2025/26 | £10,500 | Eligible employers |
| 2024/25 | £5,000 | Eligible employers with a £100k NI liability cap |
Employers claim the Employment Allowance through payroll systems to offset National Insurance contributions. The Employment Allowance does not carry over to the next tax year, so employers use it fully within the applicable year.
What is the purpose of the Employment Allowance?
The Employment Allowance lowers employment costs for smaller businesses by cutting the employer National Insurance bill. The Employment Allowance reduces the annual secondary Class 1 NI liability by a fixed amount, freeing up cash that smaller employers can redirect toward growth, hiring, or other business priorities. The Employment Allowance provides financial support to eligible employers, helping them manage employment costs and making it more affordable to maintain or expand their workforce.
Why Does the Employment Allowance Matter for Employers?
The Employment Allowance matters for employers because the allowance reduces a fixed amount of employer National Insurance (NI) costs, freeing up cash flow for smaller businesses. The Employment Allowance decreases the annual secondary Class 1 NI liability by up to £10,500 for the 2026/27 tax year, lowering the financial burden of employment. The Employment Allowance makes it more affordable for eligible businesses to maintain and expand their workforce.
The Employment Allowance reduces the per-employee on-cost of hiring. The Employment Allowance cuts the employer NI bill before any payment is made to HMRC. For approximately 865,000 small businesses in the UK, the Employment Allowance represents annual savings that employers can redirect toward wages, training, technology investment, or other operational needs. The Employment Allowance allows smaller employers to save the entire employer NI liability or a large portion of it, acting as a buffer against rising employment costs.
Who Can Claim the Employment Allowance?
An employer can claim the Employment Allowance if their previous tax year's secondary Class 1 National Insurance bill was below the de minimis state aid limit. The business must employ at least one individual earning above the secondary threshold who is not the sole director. Eligibility is restricted to businesses that are not single-director companies without other employees meeting the earnings criteria. The Employment Allowance benefits smaller employers who genuinely incur employment costs beyond a sole company director. Employers verify eligibility each tax year, because eligibility can change based on payroll size, company structure, and previous year's National Insurance contributions.
What is the deadline for claiming Employment Allowance?
You can claim the Employment Allowance during the current tax year and backdate a claim for up to the previous four tax years. The four-year backdating window allows employers to recover missed savings, provided they met the eligibility criteria during those periods. Employers submit claims promptly, because earlier submissions result in faster receipt of the allowance.
Who Cannot Claim the Employment Allowance?
Single-director companies with no other employees earning above the secondary threshold cannot claim the Employment Allowance. Employers whose prior-year secondary Class 1 National Insurance bill exceeded the de minimis state aid limit cannot claim the Employment Allowance. Businesses operating predominantly in the public sector are excluded from claiming the Employment Allowance.
How Much Does the Employment Allowance Save Employers?
The Employment Allowance saving is the employer's secondary Class 1 NI bill up to the annual allowance value of £10,500 for the 2026/27 tax year. When an employer's total National Insurance bill is £8,000, the Employment Allowance covers the entire amount. When the bill is £14,000, the maximum saving is capped at £10,500. Employers with a smaller NI bill save the full amount, and employers with larger bills save up to the capped value. The Employment Allowance reduces the cost of employer National Insurance, providing financial relief for smaller businesses, which can use the savings to support cash flow and hiring costs.
How Do You Claim the Employment Allowance?
You claim the Employment Allowance through your payroll software by selecting the Employment Allowance option on the Employer Payment Summary (EPS) sent to HMRC. After you select the option, the Employment Allowance automatically offsets your employer National Insurance contributions until the full annual amount is used. The Employment Allowance claim is integrated within your payroll system, applying the allowance as you run payroll throughout the tax year. There is no separate refund process. The Employment Allowance reduces your liability in real time.
To produce an accurate claim, your payroll software must be configured to include the Employment Allowance for the relevant PAYE scheme. HMRC uses the claim to adjust the amount you owe on your employer NIC bill. After submitting the claim, you refer to HMRC guidance for any follow-up actions, which are detailed in the 'After you've made a claim' section. HMRC guidance keeps your claim valid and compliant with current regulations.
How the Employment Allowance Interacts With Other Employer Savings
The Employment Allowance applies on top of other employer savings strategies, such as salary sacrifice. Salary sacrifice arrangements reduce the secondary Class 1 National Insurance (NI) bill by allowing employees to exchange part of their salary for non-cash benefits. The salary sacrifice reduction occurs before the Employment Allowance is applied. After salary sacrifice lowers the NI bill, the Employment Allowance offsets the remaining employer NI liability up to its annual cap.
The layered approach increases savings by first decreasing the taxable salary base and then applying the Employment Allowance to what remains. Employers achieve cost reductions by combining these mechanisms. For detailed calculations on how salary sacrifice and other factors affect the NI bill before applying the Employment Allowance, refer to the Employer National Insurance Calculator topic. The Employer National Insurance Calculator determines the total secondary Class 1 NI liability, forming the basis for the allowance claim.
Where the Employment Allowance Fits in Your Total Employment Costs
The Employment Allowance reduces employer National Insurance contributions, which are part of the added costs incurred beyond basic salary. These added costs include workplace pension contributions. The Employment Allowance offsets employer NI and lowers the overall cost of hiring, which matters alongside other payroll expenses.
For a full view of employment costs, you can use tools like the Workplace Pension Calculator. The Workplace Pension Calculator calculates the employer pension contributions that, combined with the Employment Allowance, provide a clearer picture of the total per-employee cost. The combined calculation supports accurate budgeting and financial planning within your business.
Keeping Your Employment Allowance Claim Accurate for 2026/27
You reconfirm eligibility each tax year and use the current 2026/27 allowance value in the calculator. Employers renew claims annually, reviewing prior-year National Insurance (NI) and eligibility before making a new claim.
To maintain accuracy, verify that your business meets the eligibility criteria, such as having a previous year's secondary Class 1 NI bill below the de minimis state aid limit and not being a single-director-only company. The Employment Allowance does not carry over automatically, so you actively claim it through your payroll software by selecting the Employment Allowance option on the Employer Payment Summary sent to HMRC each tax year.