Limited companies CANNOT claim Employment Allowance if they have just one director and that director is the only employee liable for secondary Class 1 National Insurance. This means that companies with several employees, where the director is the only employee paid above the Secondary Threshold, are not eligible for the Employment Allowance.
If a company has 2 directors or 1 director and 1 regular employee who earns above the Secondary Threshold, you’ll be eligible for Employment Allowance for the whole tax year.
This includes companies where:
- all employees are directors where both earn above the Secondary Threshold
- the company employs husband and wife directors where both earn above the Secondary Threshold
- the company employs seasonal workers where one or more is an employee earning above the Secondary Threshold in a week
The decisive factor is that the additional employees must be paid above the Secondary Threshold.
Class 1 National Insurance Secondary Threshold (ST) threshold in 2025-26
- Weekly amount of £96
- Monthly amount of £417
- Annual amount of £5,000
Example
Scenario 1: One Director
- Annual Salary: £12,570
- Employer NI Calculation:
- Taxable Earnings = £12,570 – £5,000 = £7,570
- Employer NI = £7,570 × 15% = £1,135.50
- Employment Allowance Eligibility: Not eligible, as only one employee/director is on the payroll.
- Total Employer NI Payable: £1,135.50
Scenario 2: Two Directors
Director 1 Salary: £12,570
Director 2 Salary: £5,100
- Employer NI Calculation:
Director 1:
- Taxable Earnings = £12,570 – £5,000 = £7,570
- Employer NI = £7,570 × 15% = £1,135.50
Director 2:
- Taxable Earnings = £5,100 – £5,000 = £100
- Employer NI = £100 × 15% = £15.00
- Total Employer NI Before Allowance: £1,135.50 + £15.00 = £1,150.50
- Employment Allowance Eligibility: Eligible
- Total Employer NI Payable After Allowance: £0.00 (since £1,150.50 is within the £10,500 allowance)
Changes in the year
If your company has several employees paid above the Secondary Threshold, but your circumstances change during the tax year and the director becomes the only employee paid above the Secondary Threshold, you can still claim the Employment Allowance for the tax year.
You should stop it for the following tax year, unless there are further changes to your circumstances and a further employee is taken on and paid above the Secondary Threshold.
