# The Employment Allowance for a Small Venue: Who Can Claim the £10,500, and Who Cannot

> The £10,500 Employment Allowance is one credit against your venue's employer National Insurance bill for the whole tax year, and any venue with someone besides a sole director earning over £96 a week can usually claim it. Who is excluded, how to claim it, and the month it runs out.

- Author: Alex Riesenkampff (Super44)
- Published: 2026-09-25
- Canonical: https://super44.ai/blog/uk-employment-allowance-hospitality

## Key takeaways

- The Employment Allowance is £10,500 for the 2026/27 tax year, unchanged since the government raised it from £5,000 in April 2025 (GOV.UK, Office for Budget Responsibility).
- A limited company whose sole director is the only person earning over the £96-a-week secondary threshold cannot claim at all; a second employee paid above that line unlocks the allowance for the whole tax year (GOV.UK).
- In HMRC's worked example, a steady £1,050 a month in employer National Insurance uses up the full £10,500 by month 10 of the tax year, leaving months 11 and 12 to be paid in cash.
- Any monthly employer National Insurance bill above £875 runs the allowance out before the tax year ends; five staff on 30 hours at the £12.71 National Living Wage come to about £930 a month.
- Companies under common control share one £10,500 between them, and new companies created by splitting a business partway through the tax year get no allowance at all for that year (GOV.UK).

**If your venue pays anyone other than a sole director more than £96 a week, it can almost certainly claim the £10,500 Employment Allowance for 2026/27.** It isn't automatic, though, and it isn't a discount on each person's pay. It is one credit against your whole employer National Insurance bill for the tax year, and it gets used up payroll by payroll. Take a bakery with five staff on 30 hours a week at the £12.71 National Living Wage. Its employer National Insurance comes to about £930 a month, so the credit lasts into March and the bakery pays roughly £630 in cash at the very end of the year. Hire a sixth person on the same pattern and the credit runs out in January, leaving about £2,850 to find over the last three months.

That second number is the one to plan for. For what each of those hours costs once pension and holiday pay are added too, see [the real cost of an hour of staff](/blog/uk-employer-ni-true-hourly-cost). This page is about the allowance itself: who gets it, how to claim it, and when it stops.

## Who can claim

Almost every private employer can. **The allowance is worth up to £10,500 for 2026/27, and GOV.UK's eligibility guidance lists only three things that rule a business out.** The first is doing more than half your work in the public sector, such as for local councils and NHS services. A high-street cafe or bar won't be near that line, but a caterer whose trade is mostly school, council or hospital contracts should check. The second is being a limited company where the sole director is the only person earning enough to pay employer National Insurance on. The third is being part of a group of connected companies where another company already claims it.

The last two catch real venues, so they get their own sections below.

## The single-director trap

A limited company run by one director, with nobody else earning over £96 a week, gets nothing. **GOV.UK puts it in one line: "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 is common in a venue's first year. You set up a company for your coffee shop, pay yourself as director, and run it alone with a Saturday helper on a few hours. The helper doesn't count. At six hours on £12.71, their £76.26 a week sits under the £96 line, so there is no employer National Insurance on their pay for the allowance to cover.

The trap lifts once a second employee is paid more than £96 in a week, and it lifts for the whole tax year, back to April. HMRC's worked example: "In June Mr X takes on a further employee, Mrs Y. Mrs Y is paid more than the Secondary Threshold. X Ltd. is now eligible to claim the Employment Allowance for the tax year."

A second director works too, but on a yearly test rather than a weekly one. GOV.UK says: "Directors must be paid above the annual Secondary Threshold or pro-rata if the directorship began after the start of the tax year." For 2026/27 that threshold is £5,000. So if you and a business partner are both directors and only one of you draws a salary, the company is still excluded until the other is paid over £5,000 for the year.

Young hires are the grey area. If your first proper hire is under 21, or an apprentice under 25, you pay employer National Insurance at 0% on their pay up to £967 a week. GOV.UK's guidance says "The decisive factor is that the additional employees must be paid above the Secondary Threshold," which points to yes. Its headline rule, though, talks about employees "liable for secondary Class 1 National Insurance", and at 0% there is nothing to pay. Confirm with your payroll provider or HMRC before claiming on the strength of that hire alone.

And don't stretch someone's contract to clear £96 just for the allowance. Give them the hours the rota needs. If that takes them over the line, good.

## What your first proper hire is worth

More than their own National Insurance. **Once a second person clears the threshold, the allowance also covers the employer National Insurance on your own director's salary, which for a £12,570 salary is £1,135.50 a year.**

Take a coffee shop run through a company by one director on £12,570 a year. Employer National Insurance on that salary is 15% of everything above £5,000, which comes to £1,135.50. With only a Saturday helper on six hours, the company is excluded and pays all of it.

Now hire a barista on 30 hours at £12.71. Their employer National Insurance is about £2,225 a year. Without the allowance, the company's total bill would be about £3,360. With it, the bill is nil, because £3,360 is well inside £10,500.

So the first proper hire does two things at once: the allowance covers their employer National Insurance, and the bill you were already paying on your own salary goes too. That is worth knowing when you work out whether a first hire pays for itself, and our guide to [the real cost of an hour of staff](/blog/uk-employer-ni-true-hourly-cost) covers the pension and holiday pay that sit on top. To put your own rate and hours through that arithmetic, our [employee cost calculator](/blog/employer-cost-calculator-uk) returns the yearly and per-hour figure for a given hire. It deliberately leaves the allowance out, because the credit is set against your whole payroll rather than one person, so read its National Insurance line as the gross cost and take the credit off at the payroll level using the figures below.

It doesn't change the basic question. A hire still has to earn back their wage in covers served or hours you get back. The allowance makes the sums kinder. It won't rescue a hire the trade can't support.

## The £100,000 limit went in April 2025

Size no longer rules anyone out. **GOV.UK's eligibility page says so directly: "From April 2025, Employers paying more than £100,000 in Class 1 National Insurance liabilities can apply for Employment Allowance."**

Before then, a business whose employer National Insurance bill had reached £100,000 in the previous year couldn't claim. That rule now matters only if you are backdating a claim to 2024/25 or earlier.

## How to claim it

You switch it on in your payroll software. **The claim is made by setting the Employment Allowance indicator to "Yes" on your next Employer Payment Summary to HMRC, and GOV.UK says it must be claimed again for each new tax year.**

Nothing rolls over, so check the setting after 6 April each year. Until it is on, you are paying employer National Insurance you don't need to. If you notice halfway through the year, you haven't lost those months: GOV.UK's claiming guidance lets you apply the allowance back to the start of the tax year, against National Insurance you have already paid.

## Missed a whole year?

You can still claim it. **GOV.UK allows claims for the previous four tax years.**

Each year is judged on its own rules. A claim for 2025/26 works the same way as this year's. A claim for 2024/25 is worth up to £5,000, the allowance at the time, and is subject to the £100,000 limit that still applied then. If nobody has ever ticked the box for your business, ask your bookkeeper to look back over the last four years of submissions.

## The month your allowance runs out

That depends on how big your monthly employer National Insurance bill is. **HMRC's own example is a steady £1,050 a month: the £10,500 is gone by month 10 of the tax year, and the employer pays months 11 and 12 in full.**

You can't spread the allowance out. It is set against each payroll's National Insurance as it arises, until it runs dry. So the months with no bill come first, and the bill then arrives in one block at the end of the tax year. Anything above £875 a month, which is £10,500 divided by 12, runs out before April. Put your own monthly figure in below.

**When does your Employment Allowance run out?** *(interactive calculator in the web version)*

Example (Steady monthly employer National Insurance bill: 900 £):

- Months the £10,500 allowance covers: 11.7 months
- National Insurance you pay in cash this tax year: 300 £

*Assumes the same employer Class 1 National Insurance bill every month and a claim that covers the whole tax year from 6 April, as in HMRC's worked example. A bill that grows through the year, with a summer or Christmas hire, runs the allowance out sooner than this.*

If you don't know your monthly figure, the table below works it out for common team sizes.

**When the £10,500 runs out, by team size**

| Staff on 30 hours at £12.71 | Employer NI a month (£) | Allowance runs out | Cash NI paid that tax year (£) |
| --- | --- | --- | --- |
| 3 | 556 | Covers the whole year | 0 |
| 4 | 742 | Covers the whole year | 0 |
| 5 | 927 | March | 627 |
| 6 | 1113 | January | 2852 |
| 8 | 1484 | November | 7303 |

*Our arithmetic from GOV.UK's 2026/27 rates: 15% employer National Insurance above £96 a week, on 30 hours at the £12.71 National Living Wage (£42.80 a week per person), for staff aged 21 and over on category A. Directors' own pay and any other staff are extra.*

### See the real cost of a hire before the allowance runs out

Super44 tracks prime cost, the combined share of revenue that cost of goods and labour take, straight from your connected POS and rota data, so a hiring or pay decision is judged against the real number.

[See how it works](https://super44.ai)

[Or start now, it's free](https://app.super44.ai/?entry=blog_post_get_started)

## Two venues, two companies

You get one £10,500 between them. **GOV.UK's connected-companies guidance says that if two or more companies are connected at the start of the tax year, "only one of those companies can qualify for the Employment Allowance for that tax year", and the companies decide which one claims.**

Companies are connected when one controls the other, or when the same person or people control both. That covers the usual setup of one owner running each site through its own company.

Family businesses get a narrower test. If two companies are linked only because relatives own them, say two siblings with a bar each, they count as connected only if they are "substantially commercially interdependent". That means sharing money, management, staff or premises. Two sites run as separate businesses may each claim. Whether yours are depends on how the businesses actually operate, not on how the paperwork is drawn up.

## Don't split a company mid-year to get a second allowance

It backfires. **GOV.UK's rule is that if a business splits during the tax year and creates new businesses, "there will be no entitlement to the Employment Allowance in that tax year for any of the new businesses".**

Its example is a hair salon whose two partners split the customers between two new companies in October. Neither new company gets an allowance that year. Nor can they pick up whatever the original business hadn't used. From the next tax year, the normal rules apply again.

**What the connected-companies rules mean for a multi-site owner**

*Source: GOV.UK, Employment Allowance further guidance: connected companies and eligibility, updated 28 May 2026*

- **Supported:** Companies under the same person's control share one £10,500 allowance, and new companies created by splitting a business partway through a tax year get no allowance for that year.
- **Where it depends:** Companies linked only through relatives, with separate premises, staff and money, may fall outside the connected test. That turns on how they operate day to day, and a structure set up mainly to multiply the allowance is the kind of arrangement the rules are written to catch.

Set up a second company for the reasons that usually justify one: a separate lease, a different partner, keeping one site's risk away from the other. The allowance is worth knowing about when you do it. It shouldn't be why you do it.

## Has £10,500 kept up?

It hasn't moved since April 2025. Tina McKenzie, Policy Chair of the Federation of Small Businesses, had pushed for the rise beforehand, in a statement reported by hospitality trade title CLH News on 30 October 2024: "It’s vital that increases in employment costs are accompanied by support for small employers to meet those additional costs. That’s why FSB has been calling for a substantial uplift in the Employment Allowance, to ease the level of tax on jobs in small firms."

**The allowance more than doubled that April, from £5,000 to £10,500, and has stayed there for 2026/27 while the National Living Wage went up to £12.71 an hour.** Each rise in the National Living Wage adds employer National Insurance against the same fixed credit, so the cash bill at the end of the year creeps up even if your team stays the same size.

Whether it moves again is open. The next Budget is on 28 October 2026, and nothing announced so far changes the figure. Treat £10,500 as settled for this tax year and check again after the Budget.

## What to do with this

**Switch the allowance on before your first payroll after 6 April, and if your employer National Insurance bill runs above £875 a month, start setting the difference aside from the first month.** A venue that knows its bill lands in January can plan for it like any other quarterly cost. One that doesn't finds out on a winter payroll run.

The exceptions above shouldn't put you off hiring a second person, and they aren't a reason to rearrange your companies. They are worth checking once, with your payroll provider or bookkeeper, so you know which side of each line you are on.

**Getting the Employment Allowance right each tax year**

- [ ] **Switch it on every April**: Set the Employment Allowance indicator to "Yes" on your first payroll of the tax year. It does not carry over.
- [ ] **Check the single-director rule**: A sole director with nobody else on the payroll above the threshold cannot claim. An employee paid over £96 in a week, or a second director paid over £5,000 for the year, unlocks it for the whole year.
- [ ] **Ask about under-21 or apprentice hires**: If your only other employee is on the 0% employer rate, confirm with HMRC or your payroll provider whether that hire lifts the exclusion.
- [ ] **Look back four years**: Unclaimed years can still be claimed, each under that year's rules.
- [ ] **Pick one company per group**: If you run several venues through companies you control, only one of them claims. Decide which before payroll runs.
- [ ] **Diarise the month it runs out**: Use the calculator above and set money aside for the months after the credit is gone.

## Where Super44 fits

**Super44 calculates a venue's prime cost, the combined share of net sales taken by cost of goods and labour, directly from connected POS and rota data.** It doesn't file the allowance claim; your payroll software does that. What it gives you is the labour side of the decision the allowance feeds into: whether a sixth hire, or a longer Saturday, earns back what it costs. Super44's staff scheduling redrafts next week's rota against expected demand, the owner reviews and publishes each schedule, and approved hours export as CSV for your payroll software.

For what to pay a barista, server or chef in the first place, our [wage benchmarks guide](/blog/restaurant-wage-benchmarks-by-role) covers current UK pay by role. If this is a first opening, our guide to [cash flow in a new venue's first six months](/blog/cash-flow-first-six-months) covers the wider planning that a January National Insurance bill belongs in.

## FAQ

### What is the Employment Allowance and how much is it worth for 2026/27?

It is a £10,500-a-year credit that most UK employers can set against their total employer Class 1 National Insurance bill, claimed through payroll software. The figure is unchanged for 2026/27, the same as 2025/26, having risen from £5,000 in April 2025.

### Do I have to claim the Employment Allowance every year?

Yes. It is not applied automatically and does not carry forward from a previous year's claim. You claim it by setting the Employment Allowance indicator to "Yes" on your next Employer Payment Summary, and a claim made partway through the year can be applied back to April.

### Can a single-director limited company claim the Employment Allowance?

Not while the director is the only person paid above the secondary threshold. Once a second employee is paid more than £96 in a week, or a second director more than £5,000 over the year (pro rata if appointed mid-year), the company can claim for the whole tax year.

### I run two venues through separate limited companies. Do I get £10,500 for each?

No. If the same person or people control both companies, they are connected, and only one of them can claim the allowance in a tax year. You choose which. Splitting a business into new companies partway through a year does not help either: the new companies get nothing for that year.

### Can I claim for a tax year I forgot to claim in?

Yes, for up to four previous tax years. Each year is judged on its own rules, so a claim for 2024/25 is worth up to £5,000 and is subject to the £100,000 limit that applied then.

### Will the £10,500 change at the 28 October 2026 Budget?

Nothing announced so far changes it. The £10,500 is the confirmed figure for 2026/27, and the Budget on 28 October is the next point at which it could move, so recheck it then.

## Sources

1. [GOV.UK: Rates and thresholds for employers 2026 to 2027](https://www.gov.uk/guidance/rates-and-thresholds-for-employers-2026-to-2027) — Confirms the Employment Allowance for 2026 to 2027 is £10,500, the 15% employer Class 1 National Insurance rate, the £96-a-week (£5,000-a-year) secondary threshold, and the 0% employer rate for categories M (under 21) and H (apprentice under 25) up to £967 a week. Page last updated 1 September 2026.
2. [GOV.UK: Claim Employment Allowance, eligibility](https://www.gov.uk/claim-employment-allowance/eligibility) — The current eligibility test: business or public body doing at most half its work in the public sector; single-director exclusion; one claim per group of connected companies or charities; confirms employers with more than £100,000 in Class 1 National Insurance liabilities can apply from April 2025.
3. [GOV.UK: Employment Allowance further guidance, eligibility](https://www.gov.uk/government/publications/employment-allowance-more-detailed-guidance/eligibility-for-employment-allowance-further-employer-guidance) — Detailed eligibility rules including the public-authority exclusion, the worked example of a sole director (Mr X) becoming eligible once a second employee (Mrs Y) is paid above the secondary threshold, and the business-demerger rule that new companies created by a mid-year split get no allowance that year. Last updated 28 May 2026.
4. [GOV.UK: Employment Allowance further guidance, single director companies](https://www.gov.uk/government/publications/employment-allowance-more-detailed-guidance/single-director-companies-and-employment-allowance-further-employer-guidance) — The single-director exclusion and what lifts it, including that "the decisive factor is that the additional employees must be paid above the Secondary Threshold" and that a second director must be paid above the annual threshold. Last updated 28 May 2026.
5. [GOV.UK: Employment Allowance further guidance, connected companies](https://www.gov.uk/government/publications/employment-allowance-more-detailed-guidance/connected-companies-and-employment-allowance-further-guidance-for-employers-and-their-agents) — Defines connected companies by common control, confirms only one company per connected group can claim, and sets the commercial-interdependence test for companies connected only through relatives. Last updated 28 May 2026.
6. [GOV.UK: Employment Allowance further guidance, claiming](https://www.gov.uk/government/publications/employment-allowance-more-detailed-guidance/claiming-employment-allowance-further-employer-guidance) — How to claim via the Employer Payment Summary, the requirement to claim each tax year, the worked example of a £1,050-a-month liability using up the allowance by month 10, the rule that a mid-year claim can be applied back to the start of the tax year, and the rule that the allowance is used against each liability as it arises. Last updated 28 May 2026.
7. [GOV.UK: Claim Employment Allowance, claim for past years](https://www.gov.uk/claim-employment-allowance/claim-for-past-years) — Confirms claims can be backdated up to four tax years, and that the £100,000 threshold applies only to a claim for 2024/25 or earlier.
8. [HMRC National Insurance Manual, NIM06585](https://www.gov.uk/hmrc-internal-manuals/national-insurance-manual/nim06585) — Unused Employment Allowance can be set against other current PAYE liabilities or refunded on application, but cannot be carried to a later tax year. Updated 22 July 2026.
9. [OBR: Static costing of changes to Employer National Insurance Contributions](https://obr.uk/docs/dlm_uploads/Cosings-supp-NICs-AB24-1-1.pdf) — The April 2025 package: employer rate from 13.8% to 15%, secondary threshold from £9,100 to £5,000 a year, Employment Allowance from £5,000 to £10,500.
10. [GOV.UK: National Insurance rates and categories, category letters](https://www.gov.uk/national-insurance-rates-letters/category-letters) — Defines National Insurance category letters M (employees under 21) and H (apprentices under 25).
11. [GOV.UK: Chancellor letter to the Treasury Select Committee, Budget 2026 date](https://www.gov.uk/government/publications/chancellor-letter-to-the-treasury-select-committee-tsc-budget-2026-date) — Confirms the Autumn Budget will be held on 28 October 2026. Published 31 July 2026.
12. [GOV.UK: National Living Wage increases to £12.71 per hour](https://www.gov.uk/government/news/national-living-wage-increases-to-1271-per-hour) — Rates from 1 April 2026: £12.71 (21+), £10.85 (18-20), £8.00 (under 18 and apprentice).
13. [Grant Thornton: Autumn Budget, what we know so far](https://www.grantthornton.co.uk/insights/autumn-budget/) — Rolling Budget-watch tracker; covers employer tax speculation generally and did not mention the Employment Allowance specifically, checked 25 September 2026.
14. [CLH News: Budget Support For Small Businesses Crucial For Jobs, Growth And Communities](https://catererlicensee.com/budget-support-for-small-businesses-crucial-for-jobs-growth-and-communities/) — Source of the Tina McKenzie (Federation of Small Businesses) quote calling for the Employment Allowance uplift, published 30 October 2024, before the April 2025 rise to £10,500.
15. [S R Lynn & Co: Will your employment allowance run out?](https://www.srlynn.co.uk/blog/p/will-your-employment-allowance-run-out) — Chartered accountancy worked example of a small employer's Employment Allowance being exhausted partway through the tax year. Published 7 November 2025.