Employment Allowance

Employment Allowance reduces an eligible employer's annual Class 1 NI liability by up to £10,500 (raised from £5,000 in April 2025, unchanged for 2026-27).

Most single-director PSCs cannot claim it. Since 2016, a company where the only paid employee is a single director isn't eligible. Multi-director companies, or those with at least one non-director employee earning above the secondary threshold, can claim.

The allowance is significant for small employers: it can wipe out all employer NI on a director's salary up to the personal allowance and beyond.

Related terms

• Class 4 National Insurance — NI for sole traders — 6% main rate on profits between £12,570 and £50,270, 2% above.
• Corporation Tax — Tax on company profits — 19% small profits rate up to £50k, 25% main rate above £250k, with marginal relief between.