Employment Allowance Set to Double in 2025/26

Late last year the government announced some major changes to the Employment Allowance (EA) and if you’re a small business it could save you thousands. It’s been a long time coming, but it’s safe to say these changes will be welcomed with open arms by small businesses across the UK!

From 2025/26, the annual Employment Allowance is set to more than double from £5,000 to £10,500 per business. That’s a game-changer for small businesses, especially those with a handful of employees. In fact, if you employ four people full-time on the National Living Wage, you won’t pay a penny in employers’ Class 1 NICs on their salaries.

There’s more good news! Remember that pesky rule where you could only claim EA if your total employers’ Class 1 NICs liability was below £100,000 in the previous tax year? Well, that’s being scrapped! This means many more businesses will now qualify for EA that previously couldn’t.

What does this mean for you?

If you’ve been missing out on Employment Allowance because your NICs bill was too high, you’ll want to check if you’re eligible from 2025/26. Make a note in your diary now – this could be a substantial saving for your business.
It’s worth noting that the other restrictions on claiming EA haven’t changed. So if you’re a single-director company or employing domestic staff (like a nanny), you’ll still be ineligible.

Don’t forget about backdating

Here’s a tip many businesses don’t realise: you can backdate Employment Allowance claims for the previous four tax years. So while you’re thinking about eligibility for 2025/26, it’s worth checking if you could claim for earlier years too. That could be a nice cash injection for your business!

If you’re unsure whether you qualify or need help making a backdated claim, give us a shout. We’re here to help make sure you’re not leaving money on the table.

For more details on the Employment Allowance, check the official guidance on the HMRC website.