Limited company guide
Why a single-director company with no other employees cannot claim the Employment Allowance, when a second employee changes that, and what it is worth in 2026/27.
Short answer
A company whose only employee paid above the secondary threshold is a single director cannot claim the Employment Allowance. Where there is a second employee earning above the threshold, the company can claim, and the allowance is worth up to £10,500 against the employer National Insurance bill for 2026/27. Claiming when you are not eligible leads to a repayment demand plus interest.
Written and reviewed by Waqas Sagar Member of ICAEW, Fellow of ACCA, Fellow of AAT, a double graduate and entrepreneur at heart, helping startups grow and serving thousands of businesses nationwide with an excellent team. Published by LimitedCompany.Accountants, 12 London Road, Morden, London SM4 5BQ. Reviewed 12 September 2026 against 2026/27 UK rates and current Companies House and HMRC guidance.
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QuickBooks PartnerCertified ProAdvisor100+ yearsCombined team experienceFully insuredUp to £2m indemnityA company whose only employee paid above the secondary threshold is a single director cannot claim the Employment Allowance. Where there is a second employee earning above the threshold, the company can claim, and the allowance is worth up to £10,500 against the employer National Insurance bill for 2026/27. Claiming when you are not eligible leads to a repayment demand plus interest.
The single-director exclusion
What it is worth
When two directors change the answer
Other conditions and the penalty for getting it wrong
Before you act
The rule targets companies where the only person on the payroll earning above the secondary threshold is a director. That is the classic one-person contractor or consultant company, and it is excluded.
The test looks at the whole tax year. If the company has a second employee above the threshold for part of the year, eligibility can arise, but it must be genuine employment with real work and real pay.
For 2026/27 the allowance offsets up to £10,500 of employer National Insurance. With the employer rate at 15% and the secondary threshold at £5,000, it shelters a meaningful payroll for a small company.
It is claimed through the payroll submission and applied against employer National Insurance as it arises, not paid to you as cash.
Two directors each paid above the secondary threshold means the company is not caught by the single-director exclusion and can claim, provided it meets the other conditions.
This is a real consideration for husband-and-wife companies where both work in the business, but the second salary must reflect actual duties. An artificial salary to unlock the allowance fails on both the employment and the corporation tax deduction.
Connected companies share a single allowance, and it cannot be claimed against deemed payments or, in some cases, personal and domestic staff. Public sector work has its own restriction.
If you claim wrongly, HMRC recovers the National Insurance with interest, and repeated errors attract penalties. Check eligibility each April rather than letting last year's setting roll forward.
Rates, thresholds and deadlines quoted here reflect the 2026/27 UK tax year. Check current GOV.UK guidance, or ask us, before relying on them for your own company.
Primary references
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Frequently asked
No, not where the director is the only employee paid above the secondary threshold.
Up to £10,500 against the employer National Insurance bill.
Only if they are paid above the secondary threshold, currently £5,000 a year, and the employment is genuine.
Correct the payroll and tell HMRC. The National Insurance becomes payable with interest; voluntary correction avoids the worst of the penalty position.
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Deadlines, thresholds and filing rules change. GOV.UK and Companies House publish the current statutory position; advice should then be applied to your company’s circumstances.
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