{"id":1164,"date":"2025-01-03T14:44:21","date_gmt":"2025-01-03T14:44:21","guid":{"rendered":"https:\/\/www.simplybusiness.co.uk\/knowledge\/articles\/what-is-employment-allowance\/"},"modified":"2025-05-22T13:04:10","modified_gmt":"2025-05-22T13:04:10","slug":"what-is-employment-allowance","status":"publish","type":"knowledge","link":"https:\/\/www.simplybusiness.co.uk\/knowledge\/business-tax\/what-is-employment-allowance\/","title":{"rendered":"Employment allowance: how to claim back National Insurance"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">If you\u2019re an employer, the employment allowance reduces your secondary Class 1 National Insurance contributions. But you need to claim it, as it isn\u2019t automatically applied.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Read on to find out employment allowance eligibility, how to claim it to reduce your tax bill, and important changes coming into force from April 2025.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li class=\"wp-block-list-item\"><a href=\"#what-is\">What is employment allowance?<\/a><\/li>\n\n\n\n<li class=\"wp-block-list-item\"><a href=\"#eligibility\">Employment allowance eligibility<\/a><\/li>\n\n\n\n<li class=\"wp-block-list-item\"><a href=\"#how\">How to claim employment allowance<\/a><\/li>\n\n\n\n<li class=\"wp-block-list-item\"><a href=\"#when\">When to claim employment allowance<\/a><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"what-is\">What is employment allowance?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Each year, small businesses can claim the employment allowance towards their employers\u2019 Class 1 <a href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/self-assessment\/how-to-pay-national-insurance-when-self-employed\/\" data-type=\"knowledge\" data-id=\"1440\" >National Insurance<\/a> (NI).<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Claiming the employment allowance 2024\/25 reduces your liability by up to \u00a35,000 a year. You\u2019ll see a reduction each time you run payroll, until you\u2019ve used up the \u00a35,000 or the <a href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/self-assessment\/self-assessment-deadline\/\" data-type=\"knowledge\" data-id=\"1509\" >tax year<\/a> ends.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For example, if your Class 1 NI bill comes to \u00a36,500 and you claim the employment allowance, you\u2019ll only need to pay \u00a31,500 in tax.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">You don\u2019t need to use the entire amount each year, which means you can use the employment allowance even if your employer\u2019s National Insurance liability is less than \u00a35,000.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It\u2019s important to note that there\u2019ll be an employment allowance increase to \u00a310,500 a year from April 2025.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Read more:<\/strong> <a href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/business-tax\/employer-national-insurance\/\" data-type=\"knowledge\" data-id=\"27179\" >Employer National Insurance<\/a><\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"eligibility\"><strong>Employment allowance eligibility \u2013 how can you qualify?<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">If your employer&#8217;s Class 1 National Insurance liabilities were less than \u00a3100,000 in the previous tax year, you should be able to claim the employment allowance. <\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Employment allowance eligibility extends to <a href=\"\/knowledge\/starting-out\/how-to-start-a-charity\/\" data-type=\"knowledge\" data-id=\"1036\" >charities<\/a> too, including community amateur sports clubs, as well as <a href=\"\/knowledge\/starting-out\/how-to-become-a-self-employed-carer\/\" data-type=\"knowledge\" data-id=\"873\" >care<\/a> and support workers.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-employment-allowance-criteria-which-businesses-aren-t-eligible\"><strong>Employment allowance criteria \u2013 which businesses aren\u2019t eligible?<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">You can\u2019t claim employment allowance if you\u2019re a company with one employee paid above the Class 1 National Insurance secondary threshold and that employee is also a director of the company.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">You can\u2019t include these employees in a claim:<\/p>\n\n\n\n<div id=\"nba-body-001\">\n<\/div>\n\n<ul class=\"wp-block-list\">\n<li class=\"wp-block-list-item\">those with earnings <a href=\"\/knowledge\/business-tax\/what-happens-if-im-inside-ir35\/\" data-type=\"knowledge\" data-id=\"1563\" >inside IR35<\/a> rules (don\u2019t include \u2018deemed payments\u2019 to off-payroll workers in your calculations)<\/li>\n\n\n\n<li class=\"wp-block-list-item\">those who work for you in a personal capacity, or for domestic or household work (unless they\u2019re a care or support worker)<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Public bodies or businesses that do more than half their work in the public sector can\u2019t claim the HMRC employment allowance, unless they\u2019re a charity.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-do-you-have-more-than-one-employer-paye-reference\">Do you have more than one employer PAYE reference?<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">HMRC gives every business that registers as an employer a PAYE reference number, known as an <a href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/staff\/ern-number\/\" data-type=\"knowledge\" data-id=\"1383\" >ERN<\/a> (employment reference number).<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If you\u2019ve got (or have had) more than one, then your total employer&#8217;s Class 1 National Insurance liability for the combined payrolls should be less than \u00a3100,000 in the last tax year.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"how\">How to claim employment allowance<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-claiming-employment-allowance-using-your-own-payroll-software\">Claiming employment allowance using your own payroll software<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">If you use payroll software instead of HMRC\u2019s tools, these are the steps to take:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li class=\"wp-block-list-item\">choose \u2018Yes\u2019 in the \u2018Employment Allowance indicator\u2019 field when you next send an employment payment summary (EPS) to HMRC<\/li>\n\n\n\n<li class=\"wp-block-list-item\">if it doesn\u2019t have this field, use HMRC\u2019s basic tools (described below)<\/li>\n\n\n\n<li class=\"wp-block-list-item\">you need to choose your business sector for \u2018de minimis state aid\u2019 rules, even if you don\u2019t make a profit \u2013 most businesses will be under the \u2018industrial\/other\u2019 category<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-claiming-employment-allowance-using-hmrc-s-basic-paye-tools\">Claiming employment allowance using HMRC\u2019s Basic PAYE Tools<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\"><a href=\"https:\/\/www.gov.uk\/basic-paye-tools\" rel=\"noopener noreferrer\" target=\"_blank\">Basic PAYE Tools<\/a> is HMRC\u2019s free payroll software for businesses with less than 10 employees:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li class=\"wp-block-list-item\">choose the right name in the \u2018Employer\u2019 menu on the home page<\/li>\n\n\n\n<li class=\"wp-block-list-item\">go to \u2018Change employer details\u2019<\/li>\n\n\n\n<li class=\"wp-block-list-item\">choose \u2018Yes\u2019 in the \u2018Employment Allowance indicator\u2019 field<\/li>\n\n\n\n<li class=\"wp-block-list-item\">choose \u2018Yes\u2019 under \u2018Do state aid rules apply?\u2019 if you sell goods or services and the sectors that apply to you<\/li>\n\n\n\n<li class=\"wp-block-list-item\">send your EPS<\/li>\n<\/ul>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"h-what-are-state-aid-rules\">What are state aid rules?<\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">If you sell goods or services, employment allowance is \u2018de minimis state aid\u2019 and there\u2019s a limit to how much of this you can get. Businesses in the \u2018industrial\/other\u2019 category can get \u20ac200,000 over three years.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">De minimis state aid rules don\u2019t apply to charities, amateur sports clubs, or care workers.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-employment-allowance-what-happens-after-you-claim\"><strong>Employment allowance \u2013 what happens after you claim?<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">You start using your employment allowance as soon as you make a claim. You won\u2019t hear from HMRC unless it\u2019s rejected. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-what-if-i-stop-being-eligible-for-employment-allowance\"><strong>What if I stop being eligible for employment allowance?<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">You need to choose \u2018No\u2019 in the \u2018Employment Allowance indicator\u2019 field.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">But this is only if you\u2019re no longer eligible \u2013 keep in mind that even if you use up your employment allowance, you\u2019re still eligible.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">And if you no longer employ anyone, the allowance stops at the end of the tax year.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">HMRC removes your allowance if you stop it before the end of the tax year (5 April) and you\u2019ll have to pay the National Insurance that\u2019s due.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"when\">When to claim employment allowance<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">You need to claim employment allowance every tax year \u2013 it\u2019s best to do it as early as possible.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">You can also claim for previous tax years, if you think you were eligible.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-what-if-i-claim-late\">What if I claim late?<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">If you don\u2019t end up using the allowance against your employer&#8217;s National Insurance, you can use the unclaimed amount to pay any outstanding tax or other National Insurance you owe.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If there\u2019s nothing owed on your PAYE bill, you can use it for <a href=\"\/knowledge\/business-tax\/vat-registration-threshold-small-business-guide\/\" data-type=\"knowledge\" data-id=\"1556\" >VAT<\/a> or <a href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/business-tax\/when-is-corporation-tax-due\/\" data-type=\"knowledge\" data-id=\"1592\" >corporation tax<\/a>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">You can also get a refund if you don\u2019t owe any other tax.<\/p>\n\n\n\n<div class=\"wp-block-group has-azure-200-background-color has-background has-global-padding is-layout-constrained wp-container-core-group-is-layout-30c80bf8 wp-block-group-is-layout-constrained\" style=\"border-radius:35px;margin-top:var(--wp--preset--spacing--90);margin-bottom:var(--wp--preset--spacing--90);padding-top:var(--wp--preset--spacing--90);padding-right:var(--wp--preset--spacing--90);padding-bottom:var(--wp--preset--spacing--90);padding-left:var(--wp--preset--spacing--90)\">\n<h3 class=\"wp-block-heading\" id=\"h-claiming-employment-allowance-for-past-tax-years\">Claiming employment allowance for past tax years<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">You can claim employment allowance for the previous four tax years, going back to 2020-21.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The allowance was \u00a34,000 between 6 April 2020 and 5 April 2022 and \u00a35,000 between April 2022 and April 2024.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">From April 2025, an employment allowance increase will see employers able to claim \u00a310,500 to help them cope with higher National Insurance contributions.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">You can read more about <a href=\"https:\/\/www.gov.uk\/government\/publications\/employment-allowance-more-detailed-guidance\" target=\"_blank\" rel=\"noreferrer noopener\" rel=\"noopener noreferrer\" target=\"_blank\">claiming employment allowance<\/a> in HMRC\u2019s guidance.<\/p>\n<\/div>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Do you have any unanswered questions about the employment allowance? Let us know in the comments below.<\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-useful-guides-for-small-businesses\">Useful guides for small businesses<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li class=\"wp-block-list-item\"><a href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/business-structure\/setting-up-a-limited-company\/\" data-type=\"knowledge\" data-id=\"1270\" >How to set up a limited company<\/a><\/li>\n\n\n\n<li class=\"wp-block-list-item\"><a href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/business-tax\/when-is-corporation-tax-due\/\" data-type=\"knowledge\" data-id=\"1592\" >Corporation tax: a guide for limited companies<\/a><\/li>\n\n\n\n<li class=\"wp-block-list-item\"><a href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/business-tax\/self-employed-tax-changes\/\" data-type=\"knowledge\" data-id=\"1514\" >Self Assessment tax return guide for the self-employed<\/a><\/li>\n\n\n\n<li class=\"wp-block-list-item\"><a href=\"https:\/\/www.simplybusiness.co.uk\/business-insurance\/faq\/what-type-of-business-insurance-do-i-need\/\">What type of business insurance do I need?<\/a><\/li>\n<\/ul>\n\n\n\n<div class=\"wp-block-group has-azure-200-background-color has-background has-global-padding is-layout-constrained wp-container-core-group-is-layout-94e519ba wp-block-group-is-layout-constrained\" style=\"padding-top:var(--wp--preset--spacing--80);padding-right:var(--wp--preset--spacing--40);padding-bottom:var(--wp--preset--spacing--80);padding-left:var(--wp--preset--spacing--40)\">\n<h3 class=\"wp-block-heading has-text-align-center\" id=\"h-looking-for-employers-liability-insurance\">Looking for employers&#8217; liability insurance?<\/h3>\n\n\n\n<p class=\"has-text-align-center wp-block-paragraph\">With Simply Business you can build a single <a href=\"\/business-insurance\/\" data-type=\"page\" data-id=\"5152\" >business insurance<\/a> policy combining the covers that are relevant to you. Whether it&#8217;s public liability insurance, <a href=\"\/business-insurance\/employers-liability-insurance\/\">employers&#8217; liability<\/a> or another cover you need, you can run a quick quote online and decide if we&#8217;re a good fit.<\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-a89b3969 wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/quote.simplybusiness.co.uk\/business\">Start your quote<\/a><\/div>\n<\/div>\n<\/div>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\n<div id=\"nba-body-end\">\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Employers can claim the employment allowance to reduce their National Insurance bill.<\/p>\n","protected":false},"author":3,"featured_media":3820,"comment_status":"open","ping_status":"closed","template":"","meta":{"sb_hreflang":"","sb_hreflang_url":"","disable_breadcrumbs":false,"sb_breadcrumbs":[],"sb_reviewed_by":"","sb_review_date":"","sb_enable_content_gating":true,"footnotes":""},"categories":[336,344,110],"hidden-category":[],"coauthors":[26],"class_list":["post-1164","knowledge","type-knowledge","status-publish","has-post-thumbnail","hentry","category-business-structure","category-business-tax","category-business-news"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.2 (Yoast SEO v27.2) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>What is employment allowance? A how-to guide for employers<\/title>\n<meta name=\"description\" content=\"You can claim the employment allowance to reduce your National Insurance. Read about employment allowance eligibility and 2025 changes.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/business-tax\/what-is-employment-allowance\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What is employment allowance?\" \/>\n<meta property=\"og:description\" content=\"Find out how employers can claim for some of their National Insurance liability.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/business-tax\/what-is-employment-allowance\/\" \/>\n<meta property=\"og:site_name\" content=\"Simply Business UK\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/simplybusiness\" \/>\n<meta property=\"article:modified_time\" content=\"2025-05-22T13:04:10+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.simplybusiness.co.uk\/wp-content\/uploads\/sites\/3\/2024\/06\/employment-allowance.gif\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Employment allowance: how to claim back National Insurance\" \/>\n<meta name=\"twitter:site\" content=\"@simplybusiness\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"5 minutes\" \/>\n\t<meta name=\"twitter:label2\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data2\" content=\"Sam Bromley\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.simplybusiness.co.uk\/knowledge\/business-tax\/what-is-employment-allowance\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.simplybusiness.co.uk\/knowledge\/business-tax\/what-is-employment-allowance\/\"},\"author\":{\"@type\":\"Person\",\"name\":\"Sam Bromley\",\"description\":\"\\nSam has more than 10 years of experience in writing for financial services.\u00a0He specialises in illuminating complicated topics, from IR35 to ISAs, and identifying emerging trends that audiences want to know about.\u00a0Sam spent five years at Simply Business, where he was Senior Copywriter.\"},\"headline\":\"Employment allowance: how to claim back National Insurance\",\"datePublished\":\"2025-01-03T14:44:21+00:00\",\"dateModified\":\"2025-05-22T13:04:10+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.simplybusiness.co.uk\/knowledge\/business-tax\/what-is-employment-allowance\/\"},\"wordCount\":1059,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/www.simplybusiness.co.uk\/#organization\"},\"image\":{\"@id\":\"https:\/\/www.simplybusiness.co.uk\/knowledge\/business-tax\/what-is-employment-allowance\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.simplybusiness.co.uk\/wp-content\/uploads\/sites\/3\/2024\/05\/employment-allowance.gif\",\"articleSection\":[\"Business structure\",\"Business tax\",\"Small business news\"],\"inLanguage\":\"en-GB\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.simplybusiness.co.uk\/knowledge\/business-tax\/what-is-employment-allowance\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.simplybusiness.co.uk\/knowledge\/business-tax\/what-is-employment-allowance\/\",\"url\":\"https:\/\/www.simplybusiness.co.uk\/knowledge\/business-tax\/what-is-employment-allowance\/\",\"name\":\"What is employment allowance? 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