The Employment Allowance: who qualifies and what it saves
The practical effect of the Employment Allowance, and how to claim it
The Employment Allowance reduces Employer National Insurance contributions (NIC) by up to £10,500 per year. Director-only companies do not qualify. Companies with at least one non-director employee do.
The practical effect
Without the Employment Allowance, the optimal director salary is £6,708, which minimises the NIC that the company pays and means you will pay no NIC, whilst ensuring that you build up NIC qualifying years towards your state pension. With the Employment Allowance, the optimal salary rises to £12,570 because the employer NIC arising is fully offset by the allowance, costing the company nothing in NIC.
Claiming it
We claim the Employment Allowance on your behalf when you become eligible. Tell us when you hire your first non-director employee and we will activate the claim from that point.
💡 Good to know: The Employment Allowance is worth up to £10,500 per year in Employer NIC reduction. If you hire employees above the secondary NIC threshold, this allowance can significantly reduce your monthly PAYE payments to HMRC.
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