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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). It is a flat rate reduction in the overall amount that most employers have to pay in secondary NIC in respect of their employees. In its Autumn Budget 2024, the Government confirmed two significant changes to the employment allowance, from 6 April 2025. Firstly, the allowance itself was increased substantially, to £10,500 from £5,000 per year. Also, the restriction limiting the allowance to those with an employer’s NIC liability under £100,000 per year is removed, meaning that the allowance will no longer be limited to ‘small’ employers from 2025/26. Other qualification factors (see below) will however remain unchanged. The extra allowance will at least offset, partially, the general employer NIC increases which apply from 6 April 2025, as set out in the Overview of NIC Classes, rates and thresholds guidance note.

See National Insurance Contributions (Secondary Class 1 Contributions) Bill, cl 3 and Autumn Budget 2024 ― Overview of tax legislation and rates (OOTLAR),