Single Director? Here’s How to Claim the 2025 Employment Allowance

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15d ago 9:47

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The Hidden Tax Saving for Single Director Companies

Are you a sole director of your own limited company? Do you follow the typical model—small salary, dividends, smart tax planning? If so, today's episode of the I Hate Numbers podcast is essential listening. Many think the Employment Allowance is off-limits for single director companies. But with the right setup and careful planning, you could unlock over £1100 in National Insurance savings for the 2025–26 tax year. We break down exactly how to stay legal, compliant, and cash smart—without falling foul of HMRC rules.

Main Topics & Discussion

The Rising Cost of Employers National Insurance (NI)

From 6 April 2025, employers NI increased to 15%. The point at which NI kicks in—the Secondary Threshold—also dropped to £5,000. That means you pay NI sooner and at a higher rate.

What is the Employment Allowance?

The Employment Allowance lets eligible businesses reduce their employers NI bill by up to £10,500 (2025–26 figure). But single director companies usually can't claim—unless they meet specific conditions.

Two Legal Options to Unlock the Allowance

1. Hire an Additional Employee

- Real work must be performed
- Minimum wage rules apply
- One week's work at £97 or more qualifies
- Claiming the allowance saves around £1100 per year

2. Restructure Director Roles

Resign as company director
Appoint a trusted person as director (e.g., spouse, partner)
You remain an employee, not a director
Triggers eligibility for the allowance

Both methods are legal, provided the setup is genuine and properly documented.

Essential Record-Keeping and Compliance

Use reliable payroll software
Submit claims via HMRC’s EPS service
Keep payslips, employment contracts, board minutes
Maintain proper Company House filings if changing director structure

Costly Mistakes to Avoid

Assuming you're ineligible without checking
Faking employees to trigger the allowance
Missing the claim deadline for the current tax year

Real-World Example

A single director pays themselves £12,570. Without the Employment Allowance, they'd owe £1135 in employers NI. By meeting the conditions and claiming the allowance, that bill disappears—saving over £1100 annually.

Links Mentioned in This Episode

Episode Timecodes

[00:00:00] – Introduction: Who this episode is for [00:01:17] – Rising employers NI and threshold changes [00:02:55] – What is the Employment Allowance? [00:04:00] – Option 1: Hiring an employee [00:05:30] – Option 2: Restructuring directors [00:07:08] – Legal and record-keeping requirements [00:07:50] – Common mistakes to avoid [00:08:47] – Next steps and helpful resources

Host & Show Info

Host Name: Mahmood Reza About the Host: Mahmood is an accountant, tax adviser, and founder of I Hate Numbers. With decades of experience helping small businesses stay compliant and tax-efficient, he's passionate about making finance less scary—and saving businesses money. Podcast Website: https://www.ihatenumbers.co.uk/i-hate-numbers-podcast/

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