Take a look at Chris Davies’ short video where he shares a great tip for saving tax and which could also improve your firm’s efficiency.
If you run a limited company where you’re the only employee and also the director, then you probably know that you’re not eligible for the Employment Allowance. So, if you are paying yourself a salary of say £40,000 your company has to pay employers’ national insurance of over £5,000.
If you prefer to read rather than watch, the transcript is below.
The Employment Allowance allows eligible employers to reduce their annual National Insurance bill by up to £5,000. But if you’re a sole director and the only employee earning above the threshold, HMRC doesn’t consider you eligible.
However, there’s a lesser-known option that could change that.
If your company takes on an additional employee—even for just one month—and they’re paid above the Secondary Threshold for National Insurance (which is £417 per month for 2025/26), then you become eligible for the Employment Allowance for the entire tax year.
That’s right—just one qualifying employee, for one month, could unlock up to £5,000 in savings on your employer’s NIC bill.
Let’s say you take on someone to help with admin or a short project and pay them above the threshold. That could make your company eligible, and you’d then apply the £5,000 allowance against your employer’s NI liabilities for the rest of the year.
Of course, this has to be legitimate. The employment must be real, the work genuine, and the payroll properly run, and they cannot be employed for personal, household or domestic work . But if you’re thinking about taking someone on—even temporarily—it’s worth considering how this could benefit your business.
If you’d like help working out whether this is viable for you, or want to run the numbers before you make any decisions, just get in touch. We’re here to help.
