Big Changes to Employment Allowance in 2025: What Employers Need to Know

As of April 2025, more businesses across the UK can now benefit from an increased Employment Allowance of £10,500, a significant jump from the previous £5,000 cap. This welcome update comes alongside relaxed eligibility rules, opening the door for many more employers to reduce their Class 1 National Insurance contributions (NICs).

What Is the Employment Allowance?

The Employment Allowance is a government initiative that allows eligible employers to reduce their annual National Insurance liability. From April 2025, the allowance has more than doubled to £10,500, helping businesses offset the rising cost of employer NICs.

Importantly, even if your total Class 1 NIC bill is less than £10,500, you can still claim the allowance up to the value of your liability.

How Do You Claim It?

Employers typically make their Employment Allowance claim through their Employer Payment Summary (EPS) as part of their Real Time Information (RTI) submission to HMRC. Just remember: claims must be renewed every tax year, so don’t forget to submit again annually.

What’s Changed in 2025?

The big news is the removal of the eligibility threshold that previously excluded employers with more than £100,000 in annual NIC liabilities. As of April 2025, this cap is gone, meaning more employers now qualify.

However, there are still some rules to be aware of:

• Connected companies or employers with multiple PAYE schemes must aggregate their NIC liabilities when assessing eligibility.

• The allowance only applies to Class 1 NICs, not Class 1A or 1B.

• It can only be claimed once across all PAYE schemes or connected entities.

• De minimis state aid limits may also apply, especially for companies in certain sectors.

  
  

Who Can’t Claim?

There are some important exclusions. You can’t claim the Employment Allowance if:

• You’re a limited company with a single director and no other employees.

• Your employees fall under IR35 ‘off-payroll working’ rules.

• You employ someone for personal or household work, unless they’re a carer or support worker.

  
  

Final Thoughts

The 2025 increase to £10,500 is a big win for many UK employers, particularly those facing higher payroll costs. With the removal of restrictive eligibility rules, now’s a great time to review your payroll setup and check whether your business qualifies for this valuable relief.

If you’re unsure about your eligibility or how to claim, consult with your accountant or payroll provider to ensure you're making the most of what’s available.