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Understanding the Employment Allowance and Its Benefits for Employers

Shared from Tax Insider: Understanding the Employment Allowance and Its Benefits for Employers
By Sarah Bradford, July 2025

Sarah Bradford highlights the benefits of the employment allowance and outlines the eligibility conditions. 

The employment allowance is a National Insurance allowance which eligible employers can set against their secondary Class 1 National Insurance contributions (NICs) liability. The allowance is set at £10,500 for 2025/26. However, it is capped at the amount of the employer’s secondary Class 1 NICs liability for the year, where this is lower. 

The secondary Class 1 NICs landscape changed quite significantly from 6 April 2025. From that date, the secondary Class 1 NICs rate rose to 15% (from 13.8%) and the secondary threshold fell to £5,000 a year (£96 per week, £417 per month) from £9,100 a year (£175 per week, £758 per month).  

To partially mitigate the impact of these changes, the employment allowance was increased from £5,000 to £10,500. Its

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