Employment Allowance

Employment Allowance for Schools, MATs, and Education Providers

The Employment Allowance (EA) enables eligible UK employers to reduce their Class 1 National Insurance (NI) liabilities by up to £10,500 per tax year. While central government public bodies are generally barred from claiming, educational institutions with charitable status—including academies, Multi-Academy Trusts (MATs), and independent schools—are fully eligible to claim.

With the total removal of the £100,000 employer NI cap, MATs and education providers of all sizes can claim this allowance across their payroll.

Specific Rules for Academies & Multi-Academy Trusts (MATs)

• The Exempt Charity Exemption:

  Public bodies that carry out more than 50% public sector work are normally excluded. However, HMRC explicitly exempts state-funded educational institutions and academies because they operate as exempt charities.

• Connected Entities Rule (One Claim Per MAT):

  Under HMRC rules, an entire Multi-Academy Trust—regardless of how many individual academies, schools, or separate PAYE schemes sit within it—is classified as a single connected entity.

  • A MAT can only claim one £10,500 allowance across the entire trust each tax year.
  • The trust must select one central PAYE scheme to receive the reduction. Individual schools within the trust cannot make separate claims.

• Commercial Subsidiaries:

  If a MAT runs a commercial trading arm (e.g., sports facility hire or catering subsidiaries), the connected company rule still applies across the whole group, meaning the single £10,500 allowance must be shared across all entities.

General Eligibility & Exclusion Rules

Outside the education sector, the Employment Allowance applies broadly to commercial businesses, subject to specific criteria:

Who Qualifies:

• Private sector businesses across commercial industries employing staff.
• Registered charities and non-profit organisations.
• Government contractors operating as private entities (such as IT support or cleaning services contracted to public sector sites).

Who Is Excluded:

• Public Sector Bodies:
  Local authorities, NHS trusts, and non-charitable public institutions.
• Single-Director Companies:
  Limited companies where the sole employee is also the company director.
• Sole Traders & Partnerships:
  Businesses without salaried staff (drawings are not subject to employer NI).
• Domestic Employers:
  Individuals employing staff for personal services (e.g., housekeepers, nannies, or gardeners).