What is Employment Allowance?
Employment Allowance (EA) is a government scheme that enables eligible businesses to reduce their annual Employer’s National Insurance (NI) bill by up to £5,000. This relief is designed to ease employment costs, particularly for small and medium-sized enterprises (SMEs).
Who is Eligible?
Businesses and charities can claim Employment Allowance if they:
- Had Employers’ Class 1 NI liabilities of £100,000 or less in the previous tax year.
- Are not part of a group whose combined NI liabilities exceed the threshold.
- Do not employ domestic workers (e.g., nannies or gardeners).
- Are not a public-sector organisation (except for some charities).
How Does It Work?
- The allowance automatically offsets Employer NI contributions through payroll until the full amount is used or the tax year ends.
- It must be reclaimed each year via payroll software or HMRC’s system.
Upcoming Increase in 2025
As announced by the Chancellor in the October 2024 Budget, the Employment Allowance will increase from £5,000 to £10,500 in April 2025. This expansion will provide greater relief for businesses, further reducing employment costs and supporting growth.
Why It Matters for Businesses
- Lowers hiring costs, making recruitment more affordable.
- Improves cash flow, especially for SMEs.
- Encourages business growth, as savings can be reinvested in wages, training, or expansion
Employment Allowance: What you’ll get – GOV.UK
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