Employment Allowance Eligibility: Who Can Claim?

Most employers who pay Class 1 employer NI can claim Employment Allowance in 2026/27. The main exceptions are a company where the only paid employee is also the director, employers of domestic staff, and public bodies. Connected companies share a single allowance. This page lets you check your position in a few minutes, with examples for the grey areas.

In this guide14 sections

Quick eligibility check

Answer these in order.

1. Do you pay employer Class 1 NI? If your bill is nil, there is nothing to reduce.
2. Are you a company with one employee paid above the Secondary Threshold, and is that person a director? If yes, you cannot claim.
3. Do you employ someone for personal or household reasons only? If yes, you cannot claim for that work.
4. Are you a public body, or do you do mostly public-sector work? If yes, you usually cannot claim. Charities are not excluded.
5. Are you connected with other companies? If yes, only one of you can claim.

If none of the exclusions apply, you can claim.

The sole director rule

A company cannot claim if the director is the only employee paid above the Secondary Threshold of £5,000. It is easy to meet the threshold by accident, so look at the numbers.

Situation	Can claim?
Director paid £12,570, no other staff	No
Director paid £12,570 plus a second employee paid £8,000	Yes, because two people are paid above £5,000
Two directors, both paid £12,570	Yes
Director paid £12,570 plus an assistant paid £4,000	No, because the assistant is below £5,000
Director paid £12,570 plus an assistant paid £6,000	Yes

The second person must be a genuine employee doing real work for a fair wage. HMRC looks closely at arrangements set up only to get the allowance.

What the allowance is worth in these cases

Company	Employer NI before	Employment Allowance	Employer NI to pay
Sole director on £12,570	£1,135.50	£0, not eligible	£1,135.50
Director on £12,570 plus an employee on £8,000	£1,585.50	£1,585.50	£0

Do not hire someone to qualify for the allowance unless you need them. The rule is meant for genuine employers, and HMRC can ask for repayment.

Connected companies

Companies are connected if one controls the other, or the same person or people control both. A group can only make one claim. Many groups put the whole £10,500 on the company with the biggest NI bill. A sole trader with several businesses counts as a single employer too.

Situation	Connected?	Result
Two companies owned by the same person	Yes	One allowance in total
A sole trader with two shops	Same employer	One allowance in total
Two unrelated companies sharing an office	No	Each can claim
A parent company and its subsidiaries	Yes	One allowance in total

How to allocate the allowance in a group

Pick the company with the largest NI bill, and set the Employment Allowance indicator there. Other companies in the group must not claim. Record the decision in writing. If circumstances change, you can move the claim, with care. Ask an accountant first.

Household employers

If you employ a nanny, carer or cleaner for personal reasons, you cannot claim for them. If you run a business and also employ domestic staff, you can still claim for the business employees. The allowance only covers the business payroll. See employer NI for small businesses.

Public sector limits

Public authorities cannot claim. Neither can businesses that do more than half of their work for public bodies. Charities and voluntary groups may claim. Check how much of your income comes from public contracts.

Subsidy rules

Employment Allowance counts as public financial support under the UK subsidy control rules. Most small employers never come close to any limit, but if you receive other support, ask your accountant.

Examples of businesses that can and cannot claim

Business	Can claim?	Why
Café with 4 staff	Yes	Pays employer NI on several employees
Limited company, one director, no staff	No	Only the director is paid
Limited company, director plus part-time employee on £9,000	Yes	The employee is paid above £5,000
Hospital trust	No	Public body
Charity shop with 3 paid staff	Yes	Charities can claim
Family with a nanny	No	Domestic employment
Sole trader with one employee on £20,000	Yes	Employer NI is due and no exclusion applies
Builder with all staff on a 0% category (all under 21)	Yes, but nothing to claim	The employer NI bill is nil

What happens if you claim wrongly

HMRC can ask you to pay back the allowance with interest, and may charge a penalty. If you find an error, correct it through payroll and tell HMRC as soon as you can.

What to do if you are unsure

Write down who is paid, how much, and what the person does. Keep it with your payroll records. If it is unclear, ask HMRC or your accountant before you claim. A wrong claim leads to repayment. If you qualify, follow the claim steps.

Keep evidence

For each year you claim, keep:

1. A list of staff and what each was paid
2. Proof that at least one employee other than the director was paid above £5,000, if you are a company with a director
3. Group structure notes, if you are connected with other companies
4. A copy of the claim you sent

Related reading

See the Employment Allowance guide and director salary options for the small-company angle.

Frequently asked questions

Can a sole director claim Employment Allowance?

Not if the director is the only employee paid above £5,000. If someone else on the payroll earns more than £5,000, the company can claim.

Can I claim if my spouse is the only other employee?

Yes, if they are a genuine employee paid above the Secondary Threshold for real work.

Can sole traders claim it?

Yes, if they employ staff and pay employer NI. A sole trader with no employees cannot.

Can a charity claim Employment Allowance?

Yes, in most cases, as charities are not excluded.

Can I claim for more than one company?

Only one company in a connected group can claim.

Can I claim if I employ a nanny?

Not for the nanny. You can claim for your business employees if you run a business as well.

What if I don’t know whether I’m eligible?

Ask HMRC or your accountant before you tick the box. A wrong claim leads to repayment.

Can two directors of the same company claim?

Yes, if both are paid above £5,000, because then more than one person is paid above the threshold.

Do the connected company rules apply to sole traders?

A sole trader counts as one employer, even with several businesses, and has a single allowance.

Can I claim if all my staff are apprentices or under 21?

You can claim, but you can only reduce a bill that exists. If employer NI is nil, there is nothing to take off.

Does a recently started company qualify?

Yes. There is no minimum trading period. You claim from the first payroll run if the other conditions are met.

Related guides

• Employment Allowance 2026/27: £10,500 Off Employer NI
• How to Claim Employment Allowance (Step by Step)
• Director Salary 2026/27: £5,000, £6,708 or £12,570?
• Employer NI for Small Businesses: Hiring Cost and Cash Flow
• Can You Claim Back Employer NI? Yes, in These Cases

Official sources

• Employment Allowance
• HMRC guidance on Employment Allowance eligibility