National Insurance Employment Allowance

In this article, we look at the Employment Allowance. This is particularly relevant to the CII R03 exam and may also be tested in the AF1 and AF5 exams.

This article is correct as at 15 July 2025 and is relevant to examinable tax year 2024/25.

From April 2014 an Employment Allowance was introduced for businesses and charities.  The annual Employment Allowance is currently £5,000 and can be offset against an employer’s liability for Class 1 secondary National Insurance contributions. It effectively acts as a £5,000 nil rate band for employers – note that it does not apply to employees’ National Insurance contributions.

This allowance is designed to support companies that support employment and hence is not available to companies where the director is the only employee.

It is also unavailable where a company (or group of connected companies) had employer Class 1 National Insurance liabilities exceeding £100,000 in the previous tax year.

The allowance applies per employer. If an employer operates more than one PAYE scheme, they must choose which scheme to claim the allowance against.

Grab the resources you need!

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Alternatively, you can try the taster for AF1 or AF5 if you’re studying for either of those exams.