Since 6th April Employers’ National Insurance has increased from 13.8% to 15%, creating additional tax burdens for many. We want to make sure that you are aware of the Employment Allowance and if you are able to claim it, specifically sole director businesses.
Firstly, what is the Employment Allowance?
The Employment Allowance (EA) allows eligible employers to reduce their annual National Insurance bill by £10,500. Think of it like the first £10,500 of Employers NIC that your business is liable for is covered by the government, you do not need to pay this.
Typically, a business with only one director and no other employees is not eligible for this allowance, so will therefore have to pay NIC at a rate of 15% on their salary in excess of £5,000.
For those on a ‘directors’ salary’ of £12,570 per year, this equates to £1,135 of employers’ NIC.
When do employers become eligible?
Companies with one director must not be the only employee liable for secondary Class 1 National Insurance. What this means is that if the business were to employ someone who is not a director, and pay them above the secondary threshold, the company would be eligible to claim the Employees Allowance for the whole year.
Eligibility is not affected by the length of employment, for example, the employee does not need to be employed for the full year for the business to be eligible for this annual relief.
Please note: this eligibility would not roll in to the next year, it is taken on a year-by-year basis.
We have included a table below to show you the level of pay your employee would need to receive for the business to be entitled to the employment allowance:
If you were thinking about taking on an employee on a short-term contract or part way through the year, not only would they be helping with the operations of the business, but they could also open up relief available to cover the cost of Employers NIC.
For further information on Employers NIC changes please see below for a link to our other blog post where we have shared a useful tool to calculate your Employers NIC liability for the year 2025/26.
Forecasting Employer NI changes 25/26: Multiple Employees Calculator – Whyfield
As always, we are here to help and advise you, so don’t hesitate to get in touch with any queries or questions that you may have around Employers NIC, your obligations as an employer, or your business in general.
Give us a call on 01872 267 267, email us contact@whyfield.co.uk, or message us on WhatsApp 0777 49 39 111