Employment Allowance Calculator United Kingdom

This calculator shows how much of your 2026/27 employer National Insurance bill the Employment Allowance covers, what is left to pay and how much of the allowance would go unused. Enter your headcount and average salary to see the result.

What the Employment Allowance is worth

Employers pay Class 1 secondary National Insurance at 15% on every pound each employee earns above the secondary threshold of £5,000 a year. It is charged on top of wages and is due whether or not the business made a profit.

The Employment Allowance offsets up to £10,500 of that bill each tax year. It rose from £5,000 in April 2025, when the employer rate went up and the threshold came down, to protect small employers from the increase. It is applied inside payroll, reducing what you pay HMRC each month until the annual amount is used up.

For a small payroll it can remove the bill entirely. Four staff on £22,500 each generate about £10,500 of employer NICs, all of it covered.

How the calculator models your bill

The secondary threshold applies to each employee separately, not to the payroll as a whole. Ten people on £20,000 attract less employer NI than five people on £40,000, even though both payrolls cost £200,000, because the larger team gets ten thresholds instead of five. The calculator works out the charge per employee from your average salary and multiplies up. Five staff on £30,000, for example, generate £18,750 of employer NICs; after the £10,500 allowance, £8,250 is left to pay.

The allowance used is capped at your actual bill. If the bill is below £10,500, the surplus is shown as unused, because it is not refunded, cannot be set against Income Tax or Class 1A and does not carry forward.

What the allowance does not cover

Class 1A National Insurance on benefits in kind is outside the scheme. Company cars, fuel, private medical insurance and interest-free loans all attract Class 1A at 15%, payable each July, and the allowance cannot reduce it. Class 1B on a PAYE settlement agreement is excluded too.

That matters for a business with company cars. £12,000 of reportable benefits adds £1,800 of Class 1A that must be paid in full even if your Class 1 secondary bill is down to zero. The calculator keeps the two figures apart so the July payment does not come as a surprise.

Who is shut out

The rule that excludes the most businesses is the sole director rule. If the only person on the payroll earning above the secondary threshold is a director, the company cannot claim, so a one-person limited company paying its owner a salary gets no benefit. Take on an employee earning above the threshold, or appoint a second director on a qualifying salary, and the company can claim again.

Public bodies are excluded, and so is any business doing more than half its work in the public sector, which covers many outsourced services. Employers of personal or domestic staff cannot claim, except for care and support workers. Within a group of connected companies, only one company may claim, so a group cannot multiply the allowance by adding subsidiaries.

Planning your payroll around it

Because the allowance is a fixed amount, it covers a shrinking share of costs as the payroll grows. A three-person business paying £75,000 in total salaries has its whole employer NIC bill covered. A twenty-person business paying £600,000 has about £75,000 of employer NICs, so the allowance covers about a seventh, and the rest is a cost of growth to build into pricing.

Two things follow. Once the allowance is used up, each further hire carries the full employer NI cost. And moving reward from salary into employer pension contributions becomes more attractive, since employer pension contributions carry no National Insurance. Running the numbers with and without a pay rise shows how much of an increase reaches the employee and how much goes to NICs.

Salary sacrifice schemes work the same way by reducing the earnings on which secondary NICs are charged. If your staff use one, enter the average salary after sacrifice rather than the headline figure.

Claiming it correctly

Claim through your payroll software using the Employment Allowance indicator on the Employer Payment Summary. Nothing arrives in your bank account; your monthly PAYE payment falls until the allowance is used up.

The most common mistake is assuming the claim rolls forward. You have to make it again at the start of each tax year, and a change of payroll provider can leave an employer paying full NICs without noticing. If you have missed a year, claims can be backdated for up to four tax years, so check old records.

Businesses receiving other subsidies should also check the minimal financial assistance rules, which cap the total public support a business can receive over a rolling three-year period and apply to the allowance alongside grants and reliefs. Most small employers are well under the limit.

These figures are an estimate based on the 2026/27 employer National Insurance rate, secondary threshold and Employment Allowance, and assume every employee is paid your average salary for a full year. Real payrolls vary by month, by starters and leavers and by NI category letter, so treat this as a planning guide rather than tax advice and confirm with your payroll software or accountant.

About This Employment Allowance Calculator

Use this Employment allowance calculator to get an instant, accurate estimate. The figures follow official GOV.UK guidance and every rate and threshold is kept up to date for 2026. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.