Employer National Insurance and Employment Allowance, 2026/27
Overview
The main employer National Insurance rate increased from 13.8% to 15% on 6th April 2025, not April 2026. At the same time, the annual secondary threshold fell from £9,100 to £5,000, and Employment Allowance increased from £5,000 to £10,500 for eligible employers.
These figures continue to apply in 2026/27, from 6th April 2026 to 5th April 2027. They are not new increases for that year.
The previous £100,000 employer National Insurance eligibility restriction was also removed from April 2025. However, other Employment Allowance conditions and exclusions remain. Businesses should check both their payroll costs and whether a valid claim has been submitted for the current tax year.
Detailed Content
What are the current employer National Insurance rules?
For 2026/27, the main employer secondary Class 1 National Insurance rate is 15% on earnings above the applicable secondary threshold.
The standard secondary threshold is:
£96 per week.
£417 per month.
£5,000 per year.
For most employees, National Insurance is calculated for each earnings period, rather than simply by applying an annual threshold at year end. Directors have special annual earnings-period rules. Use the appropriate payroll calculation, especially where pay varies or a directorship begins during the year.
Special zero-rate employer rules can apply to eligible employees, including under-21s, qualifying apprentices under 25, qualifying veterans and eligible employees in Freeport or Investment Zone sites. Their conditions and upper thresholds must be checked separately.
Employer National Insurance is an employer cost. It is separate from the employee National Insurance deducted from wages.
What does Employment Allowance cover?
Eligible employers can reduce their qualifying employer secondary Class 1 National Insurance liability by up to £10,500 per tax year.
The allowance is limited to the eligible liability actually incurred. If that liability is £6,000, the reduction is £6,000, not a £10,500 payment. Unused entitlement is not a cash grant and does not carry forward as an extra allowance for a later year.
Employment Allowance does not cover employee National Insurance, PAYE Income Tax, Class 1A National Insurance on benefits or Class 1B National Insurance under a PAYE Settlement Agreement.
Who can claim?
Many businesses and charities can qualify, but eligibility must be checked each tax year.
Important restrictions include:
Single-director companies: a limited company cannot claim where it has just one director and that director is the only employee liable for secondary Class 1 National Insurance. Having other employees paid below the relevant threshold does not, by itself, resolve this exclusion.
Connected companies or charities: only one member of a connected group can claim. Each company does not receive a separate allowance merely because it has its own payroll.
Multiple PAYE schemes: an employer must nominate one scheme for the claim. Specific year-end rules may apply where eligible liability exists on other schemes.
Public-sector work: public bodies and businesses doing half or more of their work in the public sector generally cannot claim. Charities have a separate exception.
Excluded employment: liabilities arising from certain off-payroll working payments and personal, household or domestic employment are excluded. Qualifying care or support workers have an exception.
The former requirement for previous-year employer Class 1 National Insurance liabilities to be below £100,000 does not apply to 2025/26 or 2026/27. Older claims must be tested against the rules that applied to the relevant year.
Director-company eligibility can change during a tax year. Another employee or director earning above the applicable threshold may make the company eligible, subject to the other conditions. Check HMRC’s detailed rules before making or withdrawing a claim.
How do you claim?
Claim through payroll software by setting the Employment Allowance indicator to “Yes” and submitting an Employer Payment Summary (EPS) to HMRC. Changing a local software setting without sending the required submission is not enough.
HMRC Basic PAYE Tools can be used to submit the claim if the main payroll software cannot do so.
Check eligibility and submit a claim for each new tax year. Do not assume that last year’s claim automatically covers the current year. Keep payroll reporting and PAYE payments up to date, and monitor how much allowance has been used.
Do not withdraw a claim simply because the £10,500 allowance has been exhausted. Pay the remaining employer National Insurance normally. If eligibility changes, check the specific rules first: withdrawing a claim can remove the allowance already applied for that year.
What if you have missed a claim?
An eligible employer can claim during the tax year and use the allowance against qualifying employer Class 1 liabilities arising earlier in that year, up to the annual limit.
Claims can also be made up to four years after the end of the relevant tax year, subject to that year’s eligibility rules and allowance amount. A separate EPS is needed for each completed year claimed.
A late claim may create a PAYE credit if the eligible National Insurance has already been paid. HMRC may offset the credit against liabilities, or a repayment may be available under its rules. This is a recovery of eligible amounts already paid, not a grant of unused allowance.
Practical impact on small businesses
The higher rate and lower threshold increased payroll costs from April 2025 compared with the earlier rules. The larger allowance can reduce or eliminate qualifying employer Class 1 liability for some employers, but businesses that are ineligible or exceed the allowance still face a cost.
For a like-for-like 2026/27 versus 2025/26 forecast, the main rate, standard secondary threshold and allowance are unchanged. Changes in staffing, pay, bonuses, eligibility or special categories may still alter the bill.
Step By Step Procedure
Confirm the correct tax year and check the payroll software’s current rates, thresholds and employee National Insurance categories.
Forecast employer National Insurance using each employee’s pay pattern and the applicable earnings-period rules. Apply directors’ rules where relevant.
Check Employment Allowance eligibility, including director-company, connected-group, public-sector and excluded-employment conditions. Do not apply the old £100,000 restriction to 2026/27.
If eligible, submit an EPS claim for the relevant tax year through payroll software or Basic PAYE Tools. Retain the submission confirmation.
Reconcile the claim, allowance used and remaining PAYE liability with payroll records and HMRC’s account. Continue paying amounts not covered by the allowance.
Review missed current-year and earlier-year claims within the permitted time limit, using the rules and allowance amount for each year.
Keep claim records for at least three years after the end of the tax year claimed, and longer where other record-keeping requirements or an unresolved dispute require it.
360 Accounts & Bookkeeping can help review payroll costs, Employment Allowance eligibility and claim records. Obtain advice before submitting an uncertain claim or changing director remuneration.
Frequently Asked Questions and Answers
Did employer National Insurance rise in April 2026?
The main increase to 15%, reduction of the annual secondary threshold to £5,000 and increase of Employment Allowance to £10,500 took effect on 6th April 2025. These figures continue in 2026/27.
What is the secondary threshold?
It is the earnings threshold above which employer National Insurance normally becomes payable. The standard 2026/27 figures are £96 weekly, £417 monthly and £5,000 annually. Use the figure and rules appropriate to the employee’s earnings period; directors have special rules.
Can an employer with a previous-year NI bill above £100,000 claim?
Yes, potentially. That restriction was removed from April 2025. The employer must still meet the remaining eligibility conditions. Different rules apply to older claims.
Can a company with only one director claim?
Not if that director is the only employee liable for secondary Class 1 National Insurance. Other employees paid below the relevant threshold do not automatically make the company eligible. Check the detailed rules where another employee or director earns above the threshold or circumstances change during the year.
Does Employment Allowance cover benefits-in-kind National Insurance?
No. It covers qualifying employer secondary Class 1 National Insurance, not Class 1A or Class 1B liabilities.
Is the £10,500 paid into the employer’s bank account?
It is not a cash grant. It reduces qualifying liability, up to £10,500. However, a late valid claim may result in a credit or repayment of eligible National Insurance already paid, subject to HMRC’s rules.
Do I need to claim every year?
Yes. Check eligibility and submit the required EPS claim for each new tax year. Verify that the submission has been made, rather than relying only on a software setting.
Can I claim if payroll has already been submitted?
Yes, if eligible. A current-year claim can cover qualifying liability from earlier in that year. Earlier-year claims can be made within four years of the relevant tax year’s end, using that year’s rules and a separate EPS for each completed year.
What should I do when the allowance runs out?
Continue calculating and reporting payroll correctly, and pay employer National Insurance not covered by the allowance. Do not set the claim indicator to “No” merely because the annual limit has been reached.