If you’re an employer keen to see how the latest tweaks to employment allowance in 2025/26 might benefit your business, pull up a chair. We’ve had many local firms in County Durham and further afield ask us whether they can still claim. The good news is that for many, the opportunity to reduce National Insurance costs remains on the table. Today, we’re going to walk through what’s changed, who still qualifies, and how you can get the most out of this relief.
What is employment allowance?
Employment allowance is a relief that takes a chunk off your business’s Class 1 National Insurance bill. Since its inception, it’s helped smaller employers across the UK save money that can be channelled back into wages or growth. In 2025/26, the main headline is that the maximum allowance is now £10,500, which means eligible employers can knock that amount off their NI liability across the tax year. That might not sound like a fortune, but it’s a fair bit of extra funding for employee wages or business improvements.
We’ve been asked whether this is still worthwhile – we certainly think it is. If you pay employer NICs, it’s an easy way to keep more of your money in your business. This is especially useful if you’re juggling staff costs in a tight labour market. According to recent figures from the Office for National Statistics (ONS), small and medium-sized enterprises (SMEs) make up over 99% of all businesses in the UK. Many of these employers still qualify for employment allowance and continue to reap its benefits.
Who qualifies in 2025/26?
One of the big questions we often get is, “Does my business meet the criteria?” The answer depends on a few things:
- Employer’s NIC bill: From April 2025, Employers paying more than £100,000 in Class 1 National Insurance liabilities can apply for employment allowance. The rules are different if you claim for previous tax years.
- De minimis state aid rules: Yes, that looks confusing, but basically, if you’re claiming under certain sectors (like fisheries or agriculture), you might be restricted by state aid caps. It’s best to check the latest rules on Gov.uk for your industry.
- Personal and household staff: If you only employ personal staff, such as a nanny or cleaner, you can’t usually claim.
- Single allowance limit: If you run multiple businesses under your control, you’ll only be able to claim one employment allowance across them all.
These eligibility points haven’t drastically shifted for 2025/26, but it’s always wise to make sure you’re up to date on any changes that may apply to your sector. We aim to keep clients in the loop if and when HM Revenue & Customs (HMRC) changes the rules or updates the threshold. You can also check the official guidance on the HMRC website.
How to claim
If you meet the criteria, claiming employment allowance is a walk in the park, pet. You can set it up through your payroll software, or you can do it through HMRC’s Basic PAYE Tools if that’s how you prefer to run payroll. Once you’ve made the claim, the relief shows up as reduced employer NICs until the allowance is used up. If your liability is less than £10,500 over the tax year, you won’t pay a penny of employer NI until the allowance is fully applied.
For a hands-on approach, we like to support clients directly. If you’re handling your own payroll, or you want a professional to help with the claim, reach out to us and ask about our payroll services, where our team can get you set up nice and quick. We’ve helped plenty of local Consett businesses do just that. And if you’re growing outside County Durham, no bother – we can still walk you through the process.
Why it still matters
Employment allowance remains one of the simplest ways to trim your National Insurance expenses, and it’s targeted at those who tend to need it most. If you’re an SME looking to expand your team or even just keep your overheads in check, claiming can make a real difference to your monthly outgoings. The ONS also reported that employer costs, including wages and NI, remain one of the biggest concerns for smaller operations. We believe every penny counts, especially when you’re looking to reinvest back into the local economy or your workforce.
On top of that, we see plenty of small businesses in the North East that aren’t claiming, simply because they assume it doesn’t apply to them. That’s a shame. The allowance is there to lighten the load for employers like you and us – the folks doing our best to keep the economy ticking.
Common pitfalls
We’ve come across a few stumbles with employment allowance claims:
- Overlooking connected businesses: If you run more than one limited company or have separate PAYE schemes that are closely linked, you might think you can claim the allowance for each. However, HMRC only allows one claim across all connected businesses.
- No more threshold: As mentioned earlier, from April 2025, Employers paying more than £100,000 in Class 1 National Insurance liabilities can apply for employment allowance.
- Mixing up personal staff: If you have personal employees rather than business employees, the allowance doesn’t apply. It’s an easy mistake if you manage your own payroll for both household staff and business staff in one system.
We help businesses in Consett and beyond avoid these pitfalls. If you’re not sure whether your structure is classed as ‘connected’ or if you’re flirting with the threshold, give us a shout. We’ll check your figures and guide you through the claim to keep you on the right side of HMRC.
Maximising your benefit
Most eligible businesses will simply see a reduction in their NIC costs. If you want to make the most of that saving, we suggest tracking what you do with the extra money. Are you freeing up some cashflow for new recruits, or paying existing staff a bit more? Are you investing in new equipment that might drive future revenues? With the allowance covering a fair chunk of NIC, it’s worth ensuring the saving is spent wisely.
We’re a growing firm ourselves. We know the difference that a few thousand pounds can make to smaller employers, especially if you’re looking to invest in people or technology. If you’d like to see how we can help channel those employment allowance savings into strategic growth, get in touch.
That’s it, you got it?
Employment allowance remains a valuable relief for many UK businesses in 2025/26, and the changes won’t stop most from claiming a tidy saving. We want to see you in Consett – and across the North East – making the most of what’s on offer.
Ready to explore whether your business can still claim employment allowance? We’d love to help. Give us a bell and let’s cut that NI bill together.