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Employment allowance

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Summary

How to claim Employment Allowance in Sage Payroll.

Description

What is Employment Allowance?

It's an employer benefit that reduces your employer's National Insurance liability. In the 2024/25 tax year it's up to £5,000.

Each time you run your payroll you pay less employers’ Class 1 National Insurance. This continues until you've used the full allowance for the tax year, or until the tax year ends, whichever is sooner.

 CAUTION: As you may not be eligible from one year to another, you must apply again at the start of each tax year. 

2025/2026 tax year

Employment Allowance increases to £10,500 per year from 6 April 2025. To find out more about legislation for the new tax year, visit the payroll legislation for the 2025/2026 tax year article.

Resolution

When am I not eligible?

Over 99% of micro-businesses and 93% of small businesses can claim the allowance. 

 Regardless of the size of your company, you can’t claim the employment allowance if:

  • You’re the director and the only employee that’s paid above the secondary threshold
  • You employ someone for personal, household or domestic work. Unless they’re a care or support worker
  • You’re a public body or business doing more than half of your work in the public sector, unless you’re a charity
  • You’re a service company working. You're under IR35 rules, and your only income is the earnings of the intermediary

For more information about employment allowance, read the HMRC article Changes to Employment Allowance.

How to claim

To ensure you can claim the maximum amount, you should submit your application when you start the new tax year.

▼To apply for Employment Allowance for the new tax year

  1. From the Summary tab, under HMRC Real Time Information (RTI) Scheme, select Submit Claim.

  2. Enter the details of your employment allowance claim.
     NOTE: You must choose an industry sector before submitting your claim. If you aren’t sure what sector applies to your business, contact HMRC.  

    Industry Sector

    Agriculture

    Fisheries and Aquaculture

    Road Transport

    Industrial

    State Aid Rules Don’t Apply

    Select the industry sector that applies to your business.

    If none of the named sectors applies to you, select either:

    Industrial - if the state aid rules apply to your business 

    or

    State Aid Rules Don’t Apply - if your business doesn’t fall under state aid rules.
    State Aid Claimed € 0.00

    You don’t need to enter this value. HMRC will check this for you.

     

    The value appears in Euros because the European Commission sets the thresholds. 
  3. Select Next.
  4. Confirm the details you're submitting to HMRC then select Submit.

You can view the status of your claim from the Summary tab.

HMRC notify you within 5 working days if you don’t qualify for Employment Allowance.

The Employment Allowance Claim section may display the message:

"You’ve indicated that you aren’t eligible for Employment Allowance".

This message is now permanent. It doesn't stop you from claiming Employment Allowance.

Related Solutions

I forgot to enter my Employment Allowance to date.