Could your business be owed money? Unclaimed Employment Allowance explained
Every year, thousands of UK employers miss out on a government relief that could be putting thousands of pounds back into their business. The Employment Allowance is one of the most consistently overlooked entitlements in UK payroll — and with the allowance now worth up to £10,500 per tax year following changes introduced in April 2025, the stakes have never been higher.
If your business has never claimed, or if you have not reviewed your eligibility recently, there is a real possibility you are owed money. In some cases, businesses can reclaim from the last four tax years.
At Everett King, our payroll and tax team works with clients across Bristol, Exeter, and surrounding areas, to make sure relief like this is not left unclaimed. Here is what you need to know. Courtesy of GOV.UK
What is Employment Allowance?
Employment Allowance is a government scheme that lets eligible employers reduce their annual employer Class 1 National Insurance contributions (NICs). Rather than paying your full employer NIC bill to HMRC, the allowance is applied automatically through payroll, reducing what you owe each time you run payroll until either the full allowance has been used or the tax year ends.
For the 2025/26 tax year, the allowance increased significantly from £5,000 to £10,500. At the same time, the previous rule that blocked businesses with a Class 1 NIC liability above £100,000 in the prior year from claiming was removed entirely. This means the relief is now available to a much wider range of employers than before.
The allowance is per business, not per employee, and can only be claimed against one payroll if your business runs multiple payrolls. If your total employer NIC bill for the year is less than £10,500, you can only claim up to the amount you actually owe — the unused portion cannot be carried forward.
These changes were confirmed in the Autumn Budget 2024 and took effect from 6 April 2025, alongside an increase in the employer NIC rate from 13.8% to 15% and a reduction in the secondary threshold from £9,100 to £5,000 per year. The Employment Allowance increase was designed in part to offset the impact of these changes on smaller employers.
Who is eligible?
Most employers with at least one employee who earns above the secondary National Insurance threshold can claim. Eligible organisations include limited companies, sole traders with employees, partnerships, charities, and community amateur sports clubs.
There are some important exceptions. You cannot claim Employment Allowance if:
- Your limited company has only one director on the payroll and no other employees who pay employer NICs
- Your only employees are engaged on personal, household or domestic work such as a nanny or gardener (unless they are a carer or support worker)
- You are a public body or carry out more than 50% of your work in the public sector (some exceptions apply)
- You are claiming through connected companies — only one entity within a group can claim the allowance
If workers on your payroll are engaged under off-payroll working rules (IR35), you cannot claim Employment Allowance against those liabilities.
For businesses in Northern Ireland, the previous EU State Aid rules have largely been replaced by the Subsidy Control Act 2022 for most purposes, though the Windsor Framework means State Aid rules still apply in some circumstances. If you are based in Northern Ireland or trade across borders, it is worth taking advice before claiming. GOV.UK
Not sure if you are claiming correctly?
Our payroll team reviews Employment Allowance as part of every payroll engagement. We check eligibility, make sure claims are set up correctly, and identify any years where you may have missed out.
If you are already using a payroll provider and have never had this conversation, it may be worth a second opinion. If you are managing payroll in-house, our team can support your team throughout, handling submissions, compliance, and proactive allowance reviews on your behalf.
Get in touch with Everett King’s Head of Payroll at heather.jordan@everettking.co.uk where Heather can support you throughout. Click here to Meet the Team!
How Everett King can help
Our payroll and tax team carries out Employment Allowance reviews as part of a wider commitment to making sure our clients are not leaving money on the table. When we identify a missed entitlement, we act quickly to confirm eligibility, apply the correct rules, and submit backdated claims where appropriate.
We also make sure claims are set up correctly going forward so that savings are not missed year on year. This kind of proactive review is something we provide as standard — because a good accountant should be looking for opportunities to save you money, not just processing what you send them.
If you are unsure whether your business has been claiming Employment Allowance, or if you think you may have missed out in previous years, we would encourage you to get in touch. An initial review takes very little time and could be worth considerably more than you might expect.