Employers across the UK can benefit from a £10,500 Employment Allowance during the 2026/27 tax year, providing valuable relief from rising National Insurance costs and helping smaller businesses manage payroll expenses. The allowance remains unchanged from the previous year, following a significant increase introduced in April 2025.
The Employment Allowance allows eligible employers to reduce their annual employer Class 1 National Insurance liability by up to £10,500. Businesses claim the relief through their payroll system, reducing the amount of National Insurance they pay to HM Revenue & Customs (HMRC) throughout the tax year.
The allowance was more than doubled from £5,000 to £10,500 in April 2025 as part of wider measures aimed at supporting employers facing higher payroll costs. At the same time, the employer National Insurance rate increased to 15%, while the Secondary Threshold—the point at which employers begin paying National Insurance contributions—was reduced to £5,000.
Industry experts say the continuation of the enhanced allowance into 2026/27 will provide important support for small and medium-sized enterprises. While the higher allowance helps offset increased National Insurance bills, many employers are still facing greater overall employment costs due to the changes introduced last year.
One of the most significant reforms retained for 2026/27 is the removal of the previous £100,000 employer National Insurance liability cap. This means larger employers can now qualify for Employment Allowance, provided they meet the other eligibility requirements. The change has widened access to the relief and brought thousands more employers into scope.
However, some restrictions remain. Single-director companies with no other employees paid above the National Insurance threshold generally cannot claim the allowance. Public-sector organisations may also face limitations depending on the nature of their activities.
A.S Payroll Services encourage employers to review their eligibility and ensure claims are submitted correctly through their Employer Payment Summary (EPS). Businesses that fail to claim could miss out on thousands of pounds in annual savings.
With Employment Allowance remaining at £10,500 for the 2026/27 tax year, eligible employers have a valuable opportunity to reduce payroll costs and improve cash flow amid ongoing economic pressures. While the relief may not fully offset increased National Insurance liabilities for every business, it continues to represent one of the most significant forms of payroll support available through HMRC.