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

I Hate Numbers: Simplifying Tax and Accounting

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

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• Real work must be performed
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• Minimum wage rules apply
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• One week's work at £97 or more qualifies
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• Claiming the allowance saves around £1100 per year
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2. Restructure Director Roles

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• Resign as company director
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• Appoint a trusted person as director (e.g., spouse, partner)
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• You remain an employee, not a director
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• Triggers eligibility for the allowance
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Both methods are legal, provided the setup is genuine and properly documented.

Essential Record-Keeping and Compliance

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

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

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• Webinar: How to Handle the Rise in Employers NI in April 2025
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• Book a Business Tax Chat
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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/Listen & Subscribe to I Hate Numbers

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