Employment Allowance

The Employment Allowance allows eligible employers claim a reduction up to £10,500 against their employers' Class 1 National Insurance liability each tax year.  

It is available to all employers who meet the secondary Class 1 NICs’ eligibility criteria, if both of the following apply:

• The employer is a business or public body
• The employer does less than half their work in the public sector (such as for local councils and NHS services)

NB: Please ensure that you meet the eligibility criteria (particularly if you are part of a group). See HMRC's guidance.

For further and more comprehensive information on the eligibility criteria, please consult HMRC's guidance which can be accessed here 

The Employment Allowance for tax year 2025-26 is £10,500.

Important Information

Since tax year 2020-21, employers are required to re-check their eligibility for Employment Allowance and submit a new claim to HMRC each tax year.

The method of claiming through the Employer Payment Summary however remains the same (see instructions below).

Where an employer is imported from 24-25 BrightPay in which employment allowance was enabled, 25-26 BrightPay will bring the above to your attention when you first access the 'HMRC' utility:

Claiming the Employment Allowance in BrightPay

If you establish that you are eligible to claim the employment allowance in tax year 25-26, you will need to submit an Employer Payment Summary (EPS) submission via RTI, to notify HMRC that you are claiming the employment allowance. 

To prepare an EPS for submission you must first set up your HMRC Payments schedule.

• HMRC must be notified of the employer's eligibility for the employment allowance via the Employment Payment Summary (EPS). 
• Select RTI on the menu bar
• Click New on the menu toolbar and select 'Employer Payment Summary (EPS)'
• Tick the 'include Employment Allowance indicator' option
• Select 'Indicate that employer is eligible for Employment Allowance'
• Click 'OK' to submit to HMRC when ready.
• Once the EPS has been submitted and accepted by HMRC, click back into HMRC.
• Under the National Insurance heading, you will find the option for Employment Allowance Claim
• To claim the Employment Allowance, select Enable
• I've sent an EPS.
• If you do not need to adjust your Employment Allowance Total claim select No and Save.
• The Employment Allowance will now be automatically calculated in line with the employer's Class 1 National Insurance liability each tax period, up to the maximum total of £10,500 in the tax year.  

If you are not eligible for the Employment Allowance

HMRC can be notified of your ineligibility for the employment allowance via the Employment Payment Summary (EPS). 

• Select RTI on the menu bar
  
  
• Click 'New' on the menu toolbar and select 'Employer Payment Summary (EPS)'

• Tick the 'include Employment Allowance indicator' option
  
  
• Select 'Indicate that employer is not eligible for Employment Allowance':
   
  

• Click 'OK' to submit to HMRC when ready.