How do single directors claim Employment Allowance?. National Insurance costs are rising fast for employers.
From 6 April 2025, the Employer’s National Insurance rate increased from 13.8% to 15%.
At the same time, the secondary threshold fell from £9,100 to £5,000 per year.
That means employers now pay contributions once salary exceeds £96 a week, or £417 a month.
This affects owner-managed companies, freelancers, and contractors.
If you’re a sole director-employee, you likely miss out on a valuable relief.
What Is Employment Allowance?
Reduce Your National Insurance Bill
Employment Allowance allows eligible employers to reduce their secondary Class 1 National Insurance bill.
For 2025/26, the allowance is £10,500.
Once you qualify, HMRC offsets this amount against your employer NIC bill.
Who Can’t Claim It?
You can’t claim the Employment Allowance if:
- You’re the only employee, and
- Also, if you’re also a director of your company.
This rule catches out many small companies.
You need to change that setup to unlock this allowance.
Understanding the National Insurance Thresholds
The Secondary Threshold Drops
For 2025/26, the secondary threshold is just £5,000.
That’s the amount you can pay in salary before your company owes Employer’s National Insurance.
Broken down, this equals £96 per week or £417 per month.
Meet the Lower Earnings Limit
To gain a qualifying year for state benefits, you must earn at least £125 per week.
This is the Lower Earnings Limit for 2025/26.
Multiply that by 52 weeks, and you need a minimum salary of £6,500.
What Happens Without the Employment Allowance?
The Employer Still Pays
If you earn £6,500 and don’t qualify for Employment Allowance, your company pays £225 in NIC.
The Employee Pays Nothing
You, as an employee, pay no NIC if your earnings sit between the lower earnings limit and primary threshold.
If you pay yourself a salary of £12,570, you face a NIC bill of £1,135.50 – unless you claim the allowance.
That’s a major reason to structure your payroll effectively.
How to Qualify for Employment Allowance
Option 1: Hire Another Employee
The simplest way to qualify is to hire an employee other than yourself.
You don’t need to hire full-time.
Paying someone just £97 for one week meets the qualifying rule.
That’s enough to trigger the secondary Class 1 NIC liability needed.
Safer and Smarter Hiring Ideas
To avoid unwanted attention from HMRC, hire someone for actual work.
Consider these safer approaches:
- Hire a student for summer work
- Employ your spouse or partner on a part-time basis
- Take on a family member for admin or support tasks
This keeps everything above board.
Option 2: Change the Director Setup
Resign as Director
There’s another clever route.
You resign as company director, and appoint your spouse or partner in your place.
Now, you’re an employee – but not the director.
Your company then becomes eligible for Employment Allowance.
This avoids needing to hire outside help.
Make sure Companies House is updated and all decisions are documented. If you not sure how to do this, no problem, our sister company provides Company Secretarial Services.
The Financial Impact of Claiming the Allowance
Keep More of Your Profit
By accessing the allowance, your company can now shelter up to £10,500 of NIC.
This allows you to:
- Pay a £12,570 salary tax- and NIC-free
- Save over £1,100 in employer NIC
- Boost your company’s retained profits
These savings are real and available every year.
Keep Payroll Compliant
Use Payroll Software or an Accountant
Proper record-keeping is vital.
Use reliable payroll software or work with a qualified accountant.
Declare the Employment Allowance via your HMRC Employer Payment Summary (EPS).
Keep evidence of:
- Employment contracts
- Payroll reports
- HMRC submissions
- Company board resolutions (if resigning or appointing directors)
When You Should Act
Timing Is Everything
You can only claim the Employment Allowance for the current tax year. Take note for when we focus on claiming single directors Employment Allowance
Don’t wait until the end of the year to take action.
Get advice now, and plan your payroll structure.
Common Mistakes to Avoid
Failing to Check Eligibility
Many assume they’re not eligible and miss out.
You might qualify with a small change to your staffing.
Using Artificial Arrangements
Don’t create fake employment just to claim the allowance.
HMRC could challenge any arrangements that lack substance.
Not Claiming in Time
Employment Allowance isn’t automatic. You must submit your claim through HMRC systems.
Need Help Restructuring Your Payroll?
At I Hate Numbers, we help small businesses, creatives, and companies structure payroll for efficiency and savings.
This includes:
- Tax-efficient salary planning
- Claiming Employment Allowance
- Navigating HMRC compliance rules
- Payroll support with software or outsourcing
Visit I Hate Numbers for more support and practical business advice.
Want to legally reduce your NIC bill? Hope this blog helps explain How single directors claim Employment Allowance
Need help restructuring your director-employee setup?
We’ll show you how to access Employment Allowance the smart way.
Book a call now and let’s make your payroll work harder for you.
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