How employers can save up to £10,500 on National Insurance in 2025/26
If your business operates a payroll and you’re not currently claiming the Employment Allowance, you could be missing out on a valuable tax saving. For the 2025/26 tax year, eligible employers can reduce their employer National Insurance contributions (NICs) by up to £10,500—a welcome boost for any business managing rising costs.
At London Accountants, we often find that smaller or newer employers in the capital aren’t aware they’re entitled to claim. So, here’s what you need to know:
What Is the Employment Allowance?
The Employment Allowance is a government incentive that reduces your employer’s Class 1 NIC liability. It’s claimed through your payroll software, meaning the savings apply automatically as your payroll is processed—helping improve cash flow in real time.
- It applies to the employer’s NICs only—not the employee’s.
- The allowance is now worth up to £10,500 for the 2025/26 tax year.
- Over 1.2 million employers claimed it in 2024/25—but many eligible businesses still haven’t.
Who Can Claim?
Most UK employers, including limited companies, charities, and individuals employing care or support workers, can claim. However, there are a few important exceptions:
🚫 You cannot claim if:
- You’re a public authority doing more than 50% of your work in the public sector (except charities).
- You’re a single-director company with no other paid employees.
- You employ someone under the off-payroll working rules (IR35), or someone in a purely personal/domestic role such as a nanny or gardener (unless they’re a carer or support worker).
⚠️ If your business operates multiple payrolls or is part of a group of connected companies, you can only claim once. The rules on connected companies can be complex—speak to us if you’re unsure how they apply to your structure.
What’s Changed for 2025/26?
There are some major updates this year that make the Employment Allowance more generous and accessible:
- The maximum claim has increased from £5,000 to £10,500.
- Previous restrictions that blocked larger employers have been removed.
- The allowance no longer counts as de minimis state aid, removing an administrative hurdle for many.
Can You Claim for Previous Years?
Yes—you can claim retrospectively for up to four tax years. So, if you were eligible but missed out in 2021/22, you have until 5 April 2026 to submit your claim.
Keep in mind that eligibility criteria have changed over the years, so you’ll need to check the rules for each individual tax year.
The Bottom Line
If you’re not already claiming the Employment Allowance, you could be leaving thousands of pounds on the table. It’s a simple way to reduce your tax bill and improve your business’s cash flow.
At London Accountants, we can help you:
- Confirm if you’re eligible
- Submit or backdate a claim
- Navigate complex situations like group structures or connected companies
Want to find out if you qualify? Get in touch today—we’re here to help you maximise every available opportunity.
e: office@londonaccountants.co t: 0203 137 9791
Kind Regards,
The Team at London Accountants
