Employment Allowance in 2026 to 2027: which clients can claim the £10,500, and how many staff it covers

Employment Allowance lets an eligible employer cut its yearly employer Class 1 National Insurance bill by up to £10,500. GOV.UK says you can claim even if the liability is smaller than that. For a practice, the work is not the claim itself. It is knowing which clients should claim, and how far the allowance goes before the client pays anything.

What the allowance is

GOV.UK describes it this way: it allows eligible employers to reduce their annual National Insurance liability by up to £10,500. It is taken off the employer's Class 1 bill, payroll run by payroll run, until it is used up or the tax year ends. The figure for 2026 to 2027 is on the rates and thresholds page, alongside the employer rate of 15% and the annual secondary threshold of £5,000 (£96 a week, £417 a month).

Who can claim, and who cannot

GOV.UK's eligibility page says the claimant must be a business or public body, and must do less than half its work in the public sector. Since April 2025 an employer whose Class 1 liability is above £100,000 can claim too; earlier years had a cap at that figure.

The page also lists what blocks a claim:

• Only one company in a group of connected companies can claim, and the claim applies to one payroll.
• Pay for someone whose earnings fall within the IR35 off-payroll rules cannot be included.
• Pay for someone you employ for personal, household or domestic work, such as a nanny or gardener, cannot be included unless they are a care or support worker.
• A company with one director who is the only employee paid enough to owe employer National Insurance has nothing to claim against. GOV.UK's summary page names sole employee directors among those who cannot claim.

Charities are covered only if they employ a care or support worker.

How far it goes: one to five employees

The employer pays 15% on each employee's earnings above £5,000 a year. Take employees on £28,000 each:

Each £28,000 employee costs £23,000 above the threshold, and 15% of that is £3,450. The allowance runs out part-way through the fourth. Put another way, £10,500 covers employer National Insurance on £70,000 of pay above the threshold, whatever the head count.

A client with five staff on £28,000 therefore saves £10,500 a year by claiming, which is £875 a month. A client with one employee saves £3,450. A client who forgets to claim pays all of it.

Checks before you claim

1. Is the client a company with one director and no other employee? If yes, there is no liability to set the allowance against.
2. Is it part of a group? Agree which company claims, and put the claim on that payroll only.
3. Does any worker's pay fall under IR35? Take that pay out of the claim.
4. Is the client mostly public-sector work, or a household employer? Both can rule it out.

Then record the claim in the client's payroll software as an Employment Allowance indicator, and put the decision in the file. Our new client onboarding checklist is a sensible place to ask the head-count question once, and the practice readiness check covers how you hold such answers.

What it means for fees

If a client's saving is £3,450 or more, a payroll-review fee pays for itself in the first year. Our client fee calculator shows what a monthly fee pays you per hour, so you can price the review rather than give it away.

Overlyft builds AI staff who join your team and prepare this kind of eligibility check from payroll data for you to approve, so every employer client gets asked the same four questions each April.

This is general information, not tax advice. Check GOV.UK for the client's own facts before you claim.