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What is the employment allowance?

The employment allowance is available to most small employers, reducing their liability to secondary Class 1 national insurance contributions (NIC). This is restricted to those employers with an employer’s NIC liability under £100,000 from 6 April 2020. It is a flat rate reduction in the overall amount that most employers have to pay in secondary NIC in respect of their employees. The employment allowance is set at £5,000 from 2022/23, having previously been £4,000 from 2020/21.

In its Autumn Budget 2024, the Government confirmed its intention to introduce two significant changes to the Employment Allowance, from 6 April 2025. Firstly the allowance itself will increase substantially, to £10,500 from £5,000 per annum. Also, the restriction limiting the allowance to those with an employer’s NIC liability under £100,000 pa is to be removed, meaning that the Allowance will no longer be limited to ‘small’ employers. Other qualification factors (see below) are likely to remain unchanged.

See Autumn Budget 2024 ― Overview of tax legislation and rates (OOTLAR), para 2.3.

Since 6 April 2020, as set out