Single Director? Here’s How to Claim the 2025 Employment Allowance
I Hate Numbers: Simplifying Tax and Accounting · I Hate Numbers
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Show Notes
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/Listen & Subscribe to I Hate Numbers
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