The Employment Allowance is a government scheme that lets eligible businesses reduce their annual National Insurance liability by up to £10,500 (for the 2025/26 tax year). But there are a few key rules around eligibility-especially when it comes to company directors.

Here’s the crux of it:

To claim the Employment Allowance, your business must have at least one employee (or director) who is paid above the Secondary Threshold for Class 1 National Insurance (that’s £5,000 per year in 2025/26). Now, here’s where it gets interesting in the scenario of company director only payroll:

• You’ve got two directors on the payroll, but only one is actually being paid.
• If only one director is paid, and there are no other employees, then you’re not eligible to claim the allowance.

That’s because the rules say you need more than one paid employee or director (i.e., more than one person with earnings above the secondary threshold). Just having a second director on the books doesn’t count unless they’re actually being paid above that NI threshold.

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Quick example:

• Director A: Paid £12,570 per year → above the threshold ✅
• Director B: Paid nothing → doesn’t count ❌
• No other employees → Only one qualifying person = Not eligible for Employment Allowance

BUT-if both directors were paid above the NI threshold, then yes, you could claim it.

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If you’ve got any plans to expand or add even one part-time employee, that might tip you into eligibility. Or if that second director were to start receiving a qualifying level of pay, that’d do it too. Let me know if you’d like help checking your numbers or assessing whether it’s worth making any payroll changes to unlock the allowance!