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What is the employment allowance?

The employment allowance is available to most small employers, reducing their liability to secondary Class 1 national insurance contributions (NIC). Between 6 April 2020 and 5 April 2025, this is restricted to those employers with an employer’s NIC liability under £100,000. It is a flat rate reduction in the overall amount that most employers have to pay in secondary NIC in respect of their employees. The employment allowance is £10,500 from 6 April 2025, having previously been set at £5,000 between tax years 2022/23 and 2024/25, and at £4,000 between 2020/21 and 2021/22.

In its Autumn Budget 2024, the Government confirmed two significant changes to the Employment Allowance, from 6 April 2025. Firstly, the allowance itself was increased substantially, to £10,500 from £5,000 per annum. Also, the restriction limiting the allowance to those with an employer’s NIC liability under £100,000 pa is removed, meaning that the allowance will no longer be limited to ‘small’ employers from 2025/26. Other qualification factors (see below) will however remain unchanged. The extra allowance will at least offset, partially,