What is Employment Allowance? UK Definition 2026/27
Quick Answer
Up to £10,500 off your employer NI bill for eligible employers.
Definition of Employment Allowance
Employment Allowance allows eligible employers to reduce their annual employer NI liability by up to £10,500 for 2026/27. Most employers qualify unless they're a public body, have only one employee who is also a director, or had employer NI over £100,000 in the previous tax year.
Employment Allowance — Key Facts for 2026/27
| Allowance 2026/27 | £10,500 |
| Eligibility | Most employers |
| Exclusions | Public bodies, single director companies |
| NI threshold | Under £100,000 |
How Employment Allowance Works — Example
- 13 employees, total employer NI: £12,000
- 2Employment Allowance: £10,500
- 3Actual NI payable: £1,500
- 4Saving: £10,500 per year
How Employment Allowance Affects Your Tax
Employment Allowance is valuable for small businesses. It was increased to £10,500 in April 2025 to partially offset the increased employer NI rate. Companies with only a director employee cannot claim.
Official HMRC Guidance on Employment Allowance
For official guidance, refer to HMRC's documentation. Tax rules can change, so always verify current rates and thresholds on gov.uk.
HMRC: Employment AllowanceFrequently Asked Questions about Employment Allowance
Related Tax Terms
Accuracy Note
This information is for guidance only and is based on 2026/27 tax year rates. Tax rules are complex and your circumstances may differ. For personal advice, consult a qualified accountant or tax adviser.