News and insights from the Verallo team
Unlocking the benefits of the Employment Allowance for 2025/26
As employer costs continue to climb, many businesses are actively looking for ways to ease their financial burden without compromising growth or workforce stability. One often-underused relief is the Employment Allowance, a valuable mechanism that can reduce your employer National Insurance (NI) bill for the 2025/26 tax year by up to £10,500.
At Verallo, we’re here to help businesses not just stay compliant but maximise every available opportunity to streamline their tax liabilities. We’re exploring what you need to know about the Employment Allowance and how it could benefit your organisation.
What is the Employment Allowance?
The Employment Allowance is designed to lower the amount of Class 1 National Insurance contributions (NICs) that employers pay on their employees’ earnings. Instead of applying retrospectively or through a lengthy claim process, the allowance is applied in real time, automatically offsetting your employer NIC liabilities through your payroll software, until the full allowance is used.
For the 2025/26 tax year, the relief has more than doubled, rising from £5,000 to £10,500. This increase offers a meaningful cash flow benefit to eligible businesses.
Who can benefit?
Eligibility extends to most incorporated businesses, partnerships, charities, and even individuals employing care or support workers. However, certain employers may not qualify due to the nature of their business structure or staffing arrangements.
For example, if a company has only one paid employee who also happens to be the director, it won’t meet the criteria. Similarly, organisations working predominantly in the public sector (unless they are registered charities) are not eligible. There are also exclusions where an individual is engaged under off-payroll working rules, such as contractors falling within IR35, or in cases where household staff are employed—unless those roles are for care or support.
In group structures or businesses with multiple payrolls, the allowance can only be claimed once—either by a single company or through a chosen payroll scheme. This is especially important for connected businesses, such as those owned or controlled by the same individual or group. In these cases, establishing who has control may not be straightforward, particularly for family-run operations.
What’s new for 2025/26?
There are two key updates for this tax year:
Increased Relief: The allowance has been significantly boosted to £10,500, offering greater savings per employer.
No Longer State Aid: The relief is no longer considered a form of de minimis state aid, removing an administrative hurdle that previously limited eligibility for some employers.
These changes open the door for more businesses, especially those who previously fell outside the rules—to take advantage of the allowance.
A missed opportunity?
With over 1.2 million employers making use of the allowance in 2024/25, it’s a popular relief. Yet it’s still often underutilised, particularly by new employers or those with changing business structures who may now qualify due to the rule changes.
Our advice: It’s worth reviewing your eligibility, even if you’ve never claimed before. There is also the opportunity to backdate claims for up to four tax years, which could lead to substantial savings if you’ve missed out previously. These include:
2025/26 – 5th April 2030
2024/25 – 5th April 2029
2023/24 – 5th April 2028
2022/23 – 5th April 2027
2021/22 – 5th April 2026
How Verallo can help
Understanding whether your business qualifies – and making sure you’re claiming the maximum amount-requires more than just ticking a box. At Verallo, we help clients integrate these savings into a wider tax strategy, ensuring compliance while freeing up cash that can be reinvested in your business.
If you think you might be eligible or simply want to explore how this allowance could benefit your organisation, get in touch with us today. We’ll help you determine your entitlement, assess historical claims, and ensure you’re making the most of the relief available.