Employer National Insurance and the Employment Allowance

Employer National Insurance is charged on each employee's earnings above the secondary threshold, through payroll, every pay period. It is a cost to the business, separate from the National Insurance deducted from the employee's pay.

Using our own arithmetic on annual figures, an employee paid £30,000 a year in 2026/27 would cost the employer 15% x (£30,000 minus £5,000) = £3,750 in employer National Insurance. The employee would pay 8% x (£30,000 minus £12,570) = £1,394.40 themselves.

For an employer eligible for the Employment Allowance, that £3,750 could be covered by the allowance, which reduces the employer's National Insurance bill. Directors are worked out on annual earnings rather than each pay period, which our guide to paying yourself from a limited company touches on. Our take-home pay calculator shows the employee's side.

GOV.UK says you can claim if you are a business and do less than half your work in the public sector, and that charities and employers of care or support workers can also claim. There are some important limits:

• if a company has only one director, they must not be the only employee liable for secondary Class 1 National Insurance, which is the employer's contribution
• in a group of connected companies, only one company can claim
• an employer with more than one payroll can only claim against one of them
• earnings of someone within the off-payroll working rules cannot be included
• people employed for personal, household or domestic work, such as a nanny or gardener, do not count unless they are a carer or support worker

The allowance is claimed using payroll software. Check the GOV.UK eligibility page before claiming, because the details can change.

The single director rule matters for many small companies. If the director is the only employee whose pay is high enough for employer National Insurance to be due, the company cannot claim, so any employer National Insurance on the director's salary is paid in full. Once the company takes on an employee, or has more than one director on the payroll, the position can change, which is one reason the balance between salary and dividends is worth reviewing when a company grows. Our guide to taking on your first employee covers the other steps.

The Budget on 28 October 2026 set out an unchanged employer rate of 15%, a secondary threshold of £96 a week and an Employment Allowance of £10,500 for 2027/28. These figures are announced and need to be confirmed. The National Living Wage is also due to rise to £13.21 from April 2027, which will raise pay costs for many employers. If you would like help with payroll, our payroll page explains what it involves, and we read every enquiry and, where we can, put you in touch with a local accountant through our enquiry form.