Could your business reduce its employer National Insurance bill?

Employing people is one of the biggest steps a growing business can take. It can also be one of the biggest costs.

As well as paying your employees’ salaries, your business may have to pay employer National Insurance.

The Employment Allowance can help eligible employers reduce that cost.

For the 2026/27 tax year, eligible employers can claim up to £10,500 of Employment Allowance.

That’s potentially a significant saving for a small or growing business.

What is Employment Allowance?

Employment Allowance allows eligible employers to reduce the amount of employer National Insurance they have to pay to HMRC.

Rather than receiving a cash payment, the allowance is generally claimed through your payroll and reduces the employer National Insurance liability.

For example, if your business has £8,000 of eligible employer National Insurance during the year and you qualify for the full allowance, the allowance could potentially cover that liability.

If your employer National Insurance liability is higher than the allowance, you would generally pay the amount remaining after the allowance has been used.

Who can claim?

Employment Allowance is aimed at eligible employers, but not every employer qualifies. There are specific rules around eligibility, including rules relating to the employer’s National Insurance liability and the nature of the business.

There are also restrictions for certain companies where the director is the only employee earning above the relevant threshold.

This means you shouldn’t simply assume that every limited company can claim it.

Why is it important for growing businesses?

Consider a business employing several members of staff.

Employer National Insurance can quickly become a significant cost.

If the business qualifies for Employment Allowance, reducing that liability by up to £10,500 could make a meaningful difference.

That money could instead be available to:

• Invest in the business
• Employ another member of staff
• Purchase equipment
• Improve cash reserves
• Fund marketing and growth
• Increase profitability

For a growing business, saving £10,500 isn’t just a tax saving. It can become growth capital.

Don’t forget to claim it

Employment Allowance isn’t something you should simply assume will happen automatically.

It needs to be claimed through the appropriate payroll process and eligibility needs to be considered.

This is one of those areas where having someone regularly review your payroll can pay dividends.

The Profectus View – Think beyond tax

At Profectus, we believe tax planning should form part of a wider financial strategy.

If your business is employing people, we don’t just want to tell you how much employer National Insurance you’ve paid.

We want to help you understand what your total employment costs are and how they affect:

Profit → Cash Flow → Pricing → Recruitment → Growth

That is where good financial advice becomes much more valuable than simply processing a payroll.

Are you claiming everything you’re entitled to?

If you’re employing staff and aren’t sure whether your business qualifies for Employment Allowance, we can review your position.

We’ll help you understand the numbers, identify the opportunities and make sure your business is not paying more than it needs to.