Article
7 min read
UK Employment Allowance 2025/26 Explained
Global payroll
Author
Shannon Ongaro
Last Update
June 06, 2025
Published
June 06, 2025
Key takeaways
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The April 2025 revisions to Employment Allowance remove the previous £100,000 cap on Class 1 NIC liabilities, meaning more small and medium-sized businesses can now qualify.
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Under the updated rules, eligible employers stand to save up to £10,500 in National Insurance contributions next year, freeing funds for hiring, growth, or profitability.
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With Deel, businesses automatically integrate HMRC rule changes, track eligibility, and claim the full allowance without manual effort.
Many UK businesses face rising costs associated with employer National Insurance contributions, especially as they scale. Navigating HMRC rules can be complex, and missing out on available allowances means leaving money on the table.
Deel’s in-depth knowledge of UK payroll and automated payroll engine ensures clients always stay up to date. By leveraging Deel’s UK payroll expertise, businesses confidently apply new allowances without worrying about misinterpretation of government updates or errors in payroll configuration.
Review the relaxed eligibility criteria for Employment Allowance, update payroll systems accordingly, and submit your claim promptly. With Deel Payroll, we automatically integrate these HMRC updates into your payroll workflow, minimizing manual effort.
Below is a concise overview of what’s been adjusted, the implications for your organization, and steps to take to maximize your savings.
What Is the Employment Allowance?
The Employment Allowance is a government scheme that enables eligible employers to decrease their employer National Insurance contributions. Under the current framework, it allows businesses to slash up to £5,000 from their yearly employer NICs—effectively offering a tax incentive for maintaining employees.
What changed in April 2025?
As of April 2025, the eligibility requirements have been broadened, meaning a greater number of small and medium-sized enterprises can now apply.
Companies that previously fell outside the criteria may find themselves eligible under the new regulations. Crucially, the former £100,000 cap on Class 1 National Insurance liabilities has been removed.
Now, even employers with over £100,000 in NIC liabilities can claim the Employment Allowance. The government’s objective is to lower the cost burden on expanding businesses and promote job creation throughout the UK.
What level of savings are available?
Under the revamped scheme, qualifying employers stand to save up to £10,500 in NIC payments over the next year. Those funds could be redirected toward:
- Recruiting additional team members
- Fuelling business expansion
- Boosting overall profitability
What should employers do next?
To take advantage of the new allowances, employers should:
- Examine the revised eligibility rules
- Submit an accurate application
- Update payroll systems to incorporate these changes
Failing to act could result in paying more in employer NICs than necessary.
Continuous Compliance™
Simplify UK payroll and compliance with Deel
Deel Local Payroll, powered by PaySpace, is a cloud-native payroll solution that makes UK payroll and compliance seamless. If you’re managing payroll in the UK and abroad, you can use Deel Global Payroll for fully-managed payroll services and centralized operations, all supported by in-house experts.
- Automatically integrated HMRC rule updates
- Continuous monitoring of your eligibility status
- Ensure you claim the allowance without any manual workload
- Real-time payroll capabilities for improved visibility and accuracy
Interested in how Deel can support your UK workforce? Speak with one of our specialists.
FAQs
What is the employment allowance for 2025?
As of April 2025, the Employment Allowance will increase to £10,500 per year. This allows eligible employers to reduce their annual employer National Insurance (NI) bill by up to £10,500.
What is the tax allowance for 2025-2026?
The Personal Allowance—the amount of income you can earn before paying Income Tax—remains at £12,570 for the 2025/26 tax year.
How does the employment allowance work?
The Employment Allowance lets eligible employers reduce their annual employer Class 1 National Insurance liability by up to £10,500 for the 2025/26 tax year. You claim the allowance through your payroll software, and it is applied each time you run payroll until the full allowance is used or the tax year ends, whichever comes first.
If your employer’s NI bill is less than £10,500, you can only claim up to the amount you owe. Any unused allowance cannot be refunded. Only one company in a group of connected companies can claim the allowance, and it can only be claimed against one payroll if you have multiple.
The previous restriction that only employers with less than £100,000 in Class 1 NI liabilities could claim the allowance has been removed. Now, those paying over £100,000 can also apply. Certain employees, such as those under IR35 or employed for personal/household work (unless a care/support worker), cannot be included in your claim.
How do you calculate employers' NI 2025-26?
For most employees (Category A), employers pay 15% NI on weekly earnings above £481 (£2,083 per month) for the 2025/26 tax year.
No employer NI is due on the first £481 per week (£2,083 per month) of an employee’s earnings. Above this threshold, the 15% rate applies.
The formula is:
Employer’s NI = 15 % × ( Employee’s weekly earnings − £ 481 )
Employer’s N I= 15% × (Employee’s weekly earnings−£481)
If you claim the Employment Allowance, deduct up to £10,500 from your total employer NI bill for the year.
Example Calculation: An employee earns £1,000 per week. Employer NI threshold = £481/week.
NI-eligible earnings = £1,000 - £481 = £519
Employer’s NI = 15% of £519 = £77.85 per week
About the author
Shannon Ongaro is a content marketing manager and trained journalist with over a decade of experience producing content that supports franchisees, small businesses, and global enterprises. Over the years, she’s covered topics such as payroll, HR tech, workplace culture, and more. At Deel, Shannon specializes in thought leadership and global payroll content.
