# Employment Allowance for an online shop: £10,500 off employer National Insurance, and the month it runs out, worked

> Employment Allowance takes up to £10,500 a year off employer Class 1 National Insurance. It is claimed each year and runs out above £875 a month.

- Page to cite: https://aeolookup.com/online-shops/employment-allowance-10500-online-shop-first-employee-which-month-it-runs-out-worked/
- Publisher: AEO Lookup (https://aeolookup.com/)
- Section: Online shops, Fees, payments and postage
- Published 14 October 2026
- Key fact: £10,500 over 12 months is £875 a month. A shop with a National Insurance bill of £600 a month (£7,200 a year) uses £7,200 of the allowance and pays nothing. At £1,200 a month the bill is £14,400, so the allowance runs out after 8.75 months, in the ninth month, and £3,900 is paid.
- Sources: GOV.UK, "Employment Allowance", "Employment Allowance: eligibility" and "Employment Allowance: when to claim" (reduce employers' Class 1 National Insurance by up to £10,500 a year; claim every tax year; one payroll only; not for IR35 workers or domestic employees; a single-director company where the director is the only employee liable for secondary Class 1 cannot claim; only one company in a group; may claim for the previous 4 tax years). Read 14 October 2026. The "how to claim" page was not read.

An online shop takes on its first two packers before the peak. The owner pays them through payroll, sees an employer National Insurance line appear and asks the obvious question: "is there something to take that off". For many small employers there is. It is called Employment Allowance, and it is worth knowing both how much and when it runs out.

## The rule on GOV.UK

Eligible employers can reduce their annual employers' Class 1 National Insurance liability by up to **£10,500**. The shop pays less on each payroll run until the £10,500 is used up or the tax year ends, whichever is sooner. You can still claim if your bill for the year is less than £10,500, and you claim **every tax year**.

You can claim if you are a business and do less than half your work in the public sector. You cannot include:

- someone whose earnings fall within the IR35 off-payroll rules, or
- someone you employ for personal, household or domestic work, unless they are a carer or support worker.

Other points on the page:

- If the company has only one director, that director "must not be the only employee liable for secondary Class 1 National Insurance".
- If you are part of a group, only one company in the group can claim.
- You can only claim against one payroll.
- There is a line about employers paying more than £100,000 in Class 1 National Insurance from April 2025. The page gives no more detail, so I have not worked that case.

## Two shops, the same allowance

£10,500 over 12 months is **£875 a month**. The month it runs out depends on the monthly bill:

| Monthly employer NI | Over a year | Allowance used | Left to pay | Runs out |
|---|---|---|---|---|
| £600 | £7,200 | £7,200 | £0 | not in the year |
| £1,200 | £14,400 | £10,500 | £3,900 | after 8.75 months, so month 9 |

Our arithmetic, using round example bills, not figures from a real shop. For the second shop, £10,500 divided by £1,200 is 8.75, so the bill is zero for eight payroll runs, three-quarters covered in the ninth, and in full from the tenth. For the first shop the allowance is worth £7,200, not the full £10,500, because it only wipes out what is owed.

## When to claim

The page says you can claim at any time in the tax year, but "the earlier you claim the sooner you will get the allowance". It adds that if you claim late and the allowance is not used in full, HMRC may apply the unused amount to other sums you owe or refund it after the year end if you owe nothing, and that you may be able to claim for the previous 4 tax years, back to 2021 to 2022. A shop that has employed since the spring and never claimed should check its HMRC account.

## What to have to hand

- **The payroll run and the employer NI line** for the year so far.
- **A list of any contractors** who might count as employees.
- **The date the first employee was paid,** so earlier tax years are not forgotten.
- **Related costs.** Other things that arrive when a shop grows: [late payment interest on trade invoices](https://aeolookup.com/online-shops/late-payment-interest-8-percent-over-base-rate-40-70-100-fixed-sum-trade-invoice-online-shop-worked/) and [the VAT threshold for online sellers](https://aeolookup.com/online-shops/vat-threshold-online-sellers-shopify-etsy-ebay/).

I did not read the "how to claim" page, the employer NI rate or the threshold at which the bill begins, so I used round example bills and have not given a rate. Confirm the figures with your payroll provider.

Overlyft ![](https://aeolookup.com/img/d/ours-badge.png) builds AI staff who join your shop team and watch the payroll against the allowance, show the month it will run out, and leave the claim and the check for the owner to approve.

This is general information, not tax advice. Check GOV.UK before you rely on it.

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General information for UK small firms, not legal, tax or financial advice.