How to reclaim the Employment Allowance

An eligible employer can reclaim the Employment Allowance for up to four earlier tax years, going back as far as the 2021-22 tax year, and can also claim a cash refund of any allowance left unused at the end of a year ^[1]. With the allowance now worth up to £10,500 a year and employer National Insurance charged at 15% above a £5,000 Secondary Threshold ^[11], a missed claim across several years can add up to a five-figure sum of overpaid National Insurance.

Many employers simply never switched the claim on. Around 1,418,000 employers claimed the allowance in the most recent tax year, but the take-up statistics show a steady stream of businesses that only realise later they were entitled ^[3]. The good news is that the money is not lost the moment a year closes: HMRC allows backdated claims and refunds within a four-year window.

This guide sets out how to reclaim the allowance step by step: how to check eligibility for earlier years, how to file a backdated claim through payroll or Basic PAYE Tools, how to get a refund of unused allowance, and the deadlines that govern each route.

Key takeaways

• The Employment Allowance can be reclaimed for up to four tax years after the year it applies to ^[1].
• A separate Employer Payment Summary is required for each earlier year being reclaimed ^[1].
• Unused allowance can be set against other PAYE liabilities or refunded in cash, with repayment interest ^[4].
• Employers without their own Employer Payment Summary field can reclaim through HMRC's Basic PAYE Tools ^[5].
• The four-year refund clock starts immediately after the end of each tax year with an unused amount ^[4].

Before reclaiming: confirm eligibility for each year

A backdated claim is only valid for years the employer actually qualified. The first step is to confirm eligibility for each year in question, because the rules and the amount have changed over time. The allowance was £5,000 for years up to and including the 2024-25 tax year, then doubled to £10,500 from 6 April 2025 ^[6]. A reclaim recovers the amount that applied in each specific year, not the current figure.

Eligibility for each year rests on the same core test: the employer had an employer secondary Class 1 National Insurance liability, meaning it paid at least one person above the Secondary Threshold, and was not caught by an exclusion such as the single-director rule or the public sector rule ^[7]. For years up to and including the 2024-25 tax year, the old £100,000 eligibility cap also applied, so an employer whose secondary National Insurance bill exceeded £100,000 in the previous year cannot reclaim for those earlier years even though the cap has since gone ^[6].

How far back a reclaim can go

The window is four tax years after the end of the year the allowance relates to, and no claim can reach back before the 2014-15 tax year when the allowance began ^[1]. The table below shows the amount recoverable per year for a reclaim made in the 2026-27 tax year.

An employer reviewing several open years can therefore recover a meaningful sum. Confirming the right figure for each year matters, because the reclaim must reflect the allowance that was in force at the time, not the current £10,500 ^[6]. Understanding how the underlying employer National Insurance charge worked in each year helps set the expectation for the refund.

Step by step: reclaiming for earlier years

The reclaim is made through the Employer Payment Summary, the same submission used for a current-year claim, filed once per earlier year.

First, gather the payroll records for each year being reclaimed, including the total employer secondary Class 1 National Insurance paid, so the size of the recovery can be estimated. Second, confirm the allowance was not already claimed for that year, since a duplicate claim is invalid ^[1]. Third, submit a separate Employer Payment Summary for each year, setting the Employment Allowance indicator to 'Yes' and selecting the relevant tax year ^[1]. A single Employer Payment Summary covers a single year, so an employer reclaiming three years files three submissions.

Once HMRC processes the backdated claim, it recalculates the National Insurance position for that year. If the employer has kept its PAYE payments up to date, HMRC sets the resulting credit against future or existing PAYE liabilities, unless the employer asks for it to be refunded instead ^[2]. Bureaux processing reclaims across many client schemes usually run these submissions from a single multi-client payroll dashboard rather than logging into each scheme separately.

Reclaiming through Basic PAYE Tools

An employer whose payroll software cannot send an Employer Payment Summary can use HMRC's free Basic PAYE Tools, which supports the allowance for employers of any size ^[5]. Inside the tool, the employer selects Employment Allowance from the menu on the 'Employer details' page, reads the eligibility information, answers the questions about the claim, reviews the answers on the 'Review Employment Allowance' page, and selects Finish to confirm ^[5].

The tool can submit a claim at any point in the tax year, though the earlier the claim, the sooner the allowance reduces the National Insurance bill ^[5]. For employers running payroll through commercial software, the same indicator is usually a single setting, and HMRC-recognised payroll software transmits it with the routine payroll cycle without a separate manual submission.

How much a reclaim is worth

The value of a backdated claim depends on how much employer secondary Class 1 National Insurance the employer paid in each open year, capped at the allowance for that year. A small company that paid £4,000 of employer National Insurance in each of three earlier years, and never claimed, recovers the full £4,000 for each year up to the allowance ceiling in force, a total in the region of £12,000 across the period ^[1]. A company whose bill exceeded the allowance in each year recovers the allowance figure itself, £5,000 per year for the years it applied, rather than the whole bill ^[6].

Because the allowance doubled from 6 April 2025, the single most valuable year to check is usually the 2025-26 tax year, where up to £10,500 is recoverable against a bill that fully absorbs it ^[6]. An employer that only started paying a second salaried director partway through recent years should map the exact date eligibility began, because a reclaim only runs from the point the employer genuinely qualified ^[7].

Reclaiming unused allowance as a refund

Reclaiming is not only about past years. Within a single tax year, an employer can end up with allowance it could not use, and that surplus can be recovered too. The allowance is set against employer secondary Class 1 National Insurance month by month, but if the total liability for the year comes to less than £10,500, some allowance is left over ^[4].

HMRC treats an unused amount in two ways. It can be set against the employer's other PAYE liabilities for the same tax year, such as income tax deducted from staff or employee National Insurance. If there are no other PAYE liabilities to absorb it, the employer can claim a cash refund of the unused amount ^[4]. These set-off and refund routes are the only ways to benefit from an unused amount, since there is no provision to carry a surplus into another tax year ^[4].

The refund deadline and interest

A refund of unused allowance carries its own four-year time limit, which starts immediately after the end of each tax year in which the unused amount exists ^[4]. An employer that overlooks a surplus therefore has a defined window to recover it before the claim lapses. Where HMRC does make a refund, it pays repayment interest on the amount, so the recovered sum is slightly larger than the raw unused allowance ^[4]. Keeping accurate year-end figures is what makes a surplus visible in the first place, and platforms that expose the running allowance balance through an HMRC-recognised payroll API let a finance team spot an unused amount before the year closes.

Who most often needs to reclaim

Certain employers turn up again and again in backdated claims. New companies that assumed the allowance was for larger businesses often paid full employer National Insurance in their first year or two before an accountant switched the claim on ^[3]. Companies that grew past the old £100,000 threshold and were excluded before 6 April 2025 may not realise the cap was removed, and can now claim for current and future years even though the earlier excluded years stay closed ^[6].

Businesses that changed payroll provider are another common case. A claim does not always migrate cleanly when payroll moves between systems, and an employer can find the indicator was dropped for a year while everyone assumed it was running ^[2]. Charities that only recently understood the public sector carve-out applies to them, and one-person companies that added a second salaried director, round out the list. In each case the fix is the same: confirm the year of first genuine eligibility, then file one Employer Payment Summary per open year ^[1].

After reclaiming: keeping the claim running

Once a current-year claim is in place, it carries forward automatically from one tax year to the next, so an employer does not need to reclaim every April ^[8]. The claim continues until the employer tells HMRC it is no longer eligible, or HMRC decides it is not ^[9]. An employer that stops qualifying, for example by dropping to a single paid director, must stop the claim, because continuing to claim when ineligible creates a National Insurance underpayment to correct later ^[9].

An annual eligibility review is the practical safeguard. Structures change: a company gains or loses a second salaried director, charities merge and become connected, or a group reorganises so that a different entity should hold a shared allowance ^[10]. A short check each April confirms the claim still belongs where it sits and that the Employer Payment Summary carried the indicator through the year.

Conclusion

Reclaiming the Employment Allowance comes down to two distinct recoveries: backdating a claim the employer was entitled to but never made, and recovering allowance that a valid claim could not fully use. Both run through the Employer Payment Summary, both are bounded by a four-year window, and both can put real cash back into a business that has been overpaying employer National Insurance. The doubling of the allowance makes the reclaim more valuable than it has ever been, especially for the year from 6 April 2025 onward.

The employers most likely to benefit are those whose structure changed, whose payroll only recently crossed the eligibility line, or who assumed the relief did not apply to them. A methodical pass through the open tax years, matched to the allowance figure in force for each one, turns an overlooked entitlement into a recovered sum. Businesses reviewing the wider cost of running compliant payroll can weigh that recovery against their ongoing SME payroll platform choice.

Frequently asked questions

How far back can an employer reclaim the Employment Allowance?

Up to four tax years after the end of the year the allowance applies to, and never before the 2014-15 tax year when the allowance started ^[1]. A reclaim made in the 2026-27 tax year can therefore reach back to the 2021-22 tax year, though that year closes at the end of 2025-26. Each earlier year needs its own Employer Payment Summary with the Employment Allowance indicator set to 'Yes' ^[1].

Can an employer get a cash refund of the Employment Allowance?

Yes, in two situations. If a backdated claim creates a credit and the employer has paid its PAYE up to date, HMRC sets the credit against future or existing PAYE liabilities unless the employer asks for a refund ^[2]. Separately, where allowance is left unused at the end of a tax year and there are no other PAYE liabilities to absorb it, the employer can claim a cash refund of the unused amount, with repayment interest, within four years ^[4].

Does an employer need to reclaim the allowance every tax year?

No. A claim carries forward automatically from one tax year to the next once made, so an employer claims once by setting the Employment Allowance indicator to 'Yes' on an Employer Payment Summary ^[8]. The claim only stops when the employer tells HMRC it is no longer eligible or HMRC decides it is not, so an annual eligibility review is still sensible ^[9].

What amount can be reclaimed for each earlier year?

The amount that applied in that specific year, not the current figure. The allowance was £4,000 for the 2021-22 tax year, £5,000 for the years from 2022-23 to 2024-25, and £10,500 from 6 April 2025 ^[6]. A reclaim recovers the employer secondary Class 1 National Insurance that would have been relieved at the rate and threshold in force for each year ^[11].