If employer National Insurance is now 15% and kicks in sooner, the difference between “set and forget” payroll and a quarterly tax-planning rhythm can be thousands. In this guide, you’ll see what to check every quarter, how to claim Employment Allowance (EA) correctly, and how to handle benefits-in-kind (BiKs) without nasty July/October surprises.
- Employer’s NIC rate is 15% in 2025/26 with the Secondary Threshold at £5,000/year (£96/week).
- Class 1A and Class 1B NIC on benefits are 15% in 2025/26.
- The Employment Allowance is £10,500 and can be offset as you run payroll against employer Class 1 NIC.
- From 6 April 2027, payrolling benefits becomes mandatory (most BiKs move out of P11Ds into payroll). Start preparing now.
Who this is for
UK SMEs with 5–30+ staff who value proactive, compliant payroll and want to keep more of what they earn not those chasing the cheapest fee.
What you should check every quarter
| Quarter | What to do | Why it matters |
|---|---|---|
| Q1 (Apr–Jun) | Switch on/confirm EA claim in your EPS; check you’re eligible (single-director-only payrolls stay excluded; connected companies: only one claim). Decide if you’ll voluntarily payroll benefits from April and map any exceptions (e.g., accommodation and beneficial loans). | EA reduces ongoing employer NIC bills throughout the year if it’s active from month one. Voluntary payrolling spreads employee tax in-year and simplifies July admin. |
| Q2 (Jul–Sep) | By 6 July: file P11D/P11D(b) and give employees their benefit statements. By 22 July (online): pay Class 1A NIC. Reconcile any “making good” by 6 July. Submissions must be electronic. | Avoid penalties/interest and tidy prior-year benefits before the summer break. |
| Q3 (Oct–Dec) | By 22 Oct (online): pay PSA tax + Class 1B if you use a PAYE Settlement Agreement. Mid-year benefits data audit and software readiness for 2027. | Smooths cashflow and prevents year-end pile-ups; gears you for mandatory payrolling. |
| Q4 (Jan–Mar) | Lock next-year approach: confirm which BiKs you’ll payroll from April; line up employee comms; re-confirm EA eligibility and that your EPS claim will roll into the new year. | Hit 6 April with everything switched on; no missed savings in April/May payrolls. |
Employment Allowance, done right (2025/26)
What you get
EA lets eligible employers reduce their employer Class 1 NIC by up to £10,500 in the tax year; it’s used up as you run payroll until exhausted or year-end.
Eligibility at a glance
- You cannot claim if your company’s only employee is a director (the classic single-director exclusion). Connected companies: only one can claim.
- From April 2025, employers with >£100k prior-year Class 1 NIC can apply (the old cap is removed check the fine print on GOV.UK).
How to claim (EPS)
- In your payroll software, set the Employment Allowance indicator = “Yes” on the Employment Payment Summary (EPS), or use HMRC Basic PAYE Tools.
Pro tip: Switching EA on in April maximises in-year cash benefit; switching late compresses savings into fewer pay runs (see Scenario A below).
Related internal reading:
Benefits-in-Kind: today vs 2027
Right now (2025/26):
- You can voluntarily payroll most benefits; that collects Income Tax monthly. You still submit P11D(b) and pay Class 1A (July), and if you don’t payroll, you must file P11Ds (6 July). Paper forms are not accepted.
- Class 1A NIC on benefits is 15% in 2025/26; Class 1B for PSA is 15%.
What’s changing:
- Mandatory payrolling of most benefits from 6 April 2027—HMRC will remove benefits from tax codes ahead of this change; you won’t need to register (except accommodation and loans). Plan now.
Related internal reading:
Two short, practical scenarios
Scenario A: EA switched on in April vs in Month 12
Profile: 18-staff service SME; 2025/26 secondary NIC at 15% with £5,000 ST. GOV.UK
- If EA is active from April: the £10,500 allowance offsets employer NIC across the year, improving cashflow immediately. GOV.UK
- If EA is only switched on in Month 12: you’ll still get up to £10,500 relief, but only against that month’s NIC and the system will carry back within the tax year as far as your liability allows cash arrives too late to help earlier quarters. (Mechanics: claim via EPS/BPT; the allowance offsets employer Class 1 in-year.) GOV.UK
Takeaway: Make EA part of your Q1 checklist to pull forward savings and smooth cashflow.
Scenario B: Private medical: payroll now or P11D in July?
Profile: 12 employees, each with £600/year private medical.
- Voluntary payrolling: Employees’ Income Tax on the benefit is collected monthly; employer pays Class 1A at 15% on the cash-equivalent at year-end via P11D(b) (due 6 July, pay by 22 July online). Less shock for staff; simpler July admin. GOV.UK
- P11D route: Employees get a year-end tax adjustment; employer still pays Class 1A 15% in July via P11D(b). If employees “make good” by 6 July, the Class 1A can be reduced for certain benefits. GOV.UK
Takeaway: For most SMEs, payrolling gives cleaner monthly deductions and fewer employee queries, while your Class 1A remains a July cash item to budget for.
Dates you cannot miss
- 6 July: Report expenses/benefits (P11D where applicable) and submit P11D(b); give each employee their information. GOV.UK
- 22 July (online): Pay Class 1A NIC (19 July if paying by cheque). GOV.UK
- 22 October (online): Pay PSA tax + Class 1B if you operate a PAYE Settlement Agreement. GOV.UK
Your quarterly playbook (download & pin)
- Q1: Switch on/confirm EA via EPS; decide BiKs to payroll this year; note exceptions (accommodation/loans). GOV.UK
- Q2: File P11D/P11D(b) and pay Class 1A by 22 July online. GOV.UK
- Q3: If using PSA, schedule 22 Oct payment; mid-year benefits/data audit. GOV.UK
- Q4: Lock next-year payrolling approach; re-check EA eligibility and EPS flag for 6 April. GOV.UK
Common pitfalls (and how we avoid them)
- Single-director payrolls claiming EA by mistake (HMRC can claw back). We screen this at onboarding. GOV.UK
- EA not activated on EPS—allowance sits unused until year-end. We confirm this each April. GOV.UK
- Paper P11Ds/P11D(b) (rejected). We file electronically only. GOV.UK
- July/Oct cash spikes (Class 1A/PSA) not forecasted. We bake these dates into your 52-week forecast and monthly cash plans.
Useful references (GOV.UK)
- EA: amount & how to claim (EPS/BPT) — and the £10,500 limit: GOV.UK. GOV.UK
- EA: eligibility rules (single-director exclusion; connected companies; >£100k NIC cap removed from April 2025): GOV.UK. GOV.UK
- NIC thresholds 2025/26 (Secondary Threshold £5,000/year): GOV.UK. GOV.UK
- Class 1A/1B at 15% (2025/26): GOV.UK. GOV.UK
- BiK deadlines: 6 July / 22 July / 22 Oct: GOV.UK. GOV.UK
- Mandatory payrolling from 6 Apr 2027: HMRC Technical Note. GOV.UK
What to do next
Prefer proactive over firefighting?
- Book a 20-minute planning call → we’ll audit your EA status, check your benefits flow, and drop the July/Oct items into a 52-week rolling forecast so there are no surprises.
- Useful follow-ups on our site:
CTA: Book a 20-minute planning call we’ll get your quarterly tax-planning rhythm in place.
Notes on rates & thresholds (2025/26)
- Employer NIC 15%; Secondary Threshold £5,000/year. G
- Class 1A and 1B NIC 15%.
- EA £10,500; claim via EPS/BPT; eligibility rules updated from April 2025.