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You’re the sole shareholder of a limited company which employs several members of staff. You’re working on plans to start another business with an ex-colleague. Can both businesses benefit from the full employment allowance (EA)?

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What’s it worth?

The employment allowance (EA) reduces your employers’ NI bill by up to £10,500 for 2026/27.With the employers’ NI rate at an all time high you can’t afford to miss out on this valuable allowance. That said, you also need to check whether each business you’re involved in qualifies before making a claim.

Connected companies

Where two or more companies (in this instance, including limited liability partnerships (LLPs)) are connected, only one EA can be claimed. Otherwise employers could set up many groups of limited companies to benefit from multiple EAs.

Companies are connected with each other if they are controlled by the same person(s) or one company controls the other. The meaning of control isn’t limited to a majority shareholding, companies can still be connected if they are inter-dependent or are indirectly connected through another company. If only one EA is available, you can choose which company will make the claim each year.

The first year exception

If companies become connected with each other, all is not lost, at least at first anyway. The EA is only limited if companies are connected at the start of each tax year and therefore both companies can usually claim the EA in the tax year they first become connected.

Example. On 6 May 2026, Acom Ltd acquires Gcom Ltd. Both companies are entitled to claim the full EA for the year despite them now being connected. From 6 April 2027, only one of the companies can claim the EA each year, unless and until they cease to be connected.

NI break alternative

There are other options to reduce your employers’ NI bill, but they are limited. The threshold at which employers begin to pay employers’ NI is higher for certain employees, such as those aged under 21, apprentices aged under 25 and veterans who have recently left the armed forces. If you hire a few employees from this group the NI savings can exceed those of the EA.

If one of the companies has lots of employees meeting one of the above criteria, allocate the EA to one of the other connected companies.

Sole traders and partnerships

The rules for connected companies and LLPs don’t apply to sole traders or partnerships. This means you can operate businesses through different structures and each can potentially benefit from the EA.

Example. Andrew is the sole shareholder of Acom Ltd, an established trading company which claims the EA in full. Andrew sets up a partnership with his wife, and they hire several members of staff. Andrew has control over both businesses but this has no impact on eligibility for the EA and both businesses can access it.