Small employers' relief: who qualifies and how to claim

Published Tuesday 21 April 2026

Table of contents

• What is Small Employers' Relief?
• Do I qualify for Small Employers' Relief?
• What statutory payments are covered by Small Employers' Relief?
• How much Small Employers' Relief can you claim?
• Small Employers' Relief rate changes for 2025–26
• How do you claim Small Employers' Relief?
• Small Employers' Relief and Employment Allowance
• Managing cash flow with Small Employers' Relief
• FAQs on Small Employers' Relief

Key takeaways

• Verify your eligibility for Small Employers' Relief by checking that your business paid £45,000 or less in Class 1 National Insurance contributions in the tax year before your employee's qualifying week, which entitles you to reclaim 103% of statutory parental payments.
• Use payroll software to automate your Small Employers' Relief claims, as it calculates the relief amount and submits your Employment Payment Summary to HMRC each month, rather than waiting until the new tax year to request a manual repayment.
• Recognise that Employment Allowance and Small Employers' Relief are separate schemes, and any Employment Allowance you claim does not count towards the £45,000 National Insurance threshold when assessing your eligibility for relief.
• Apply to HMRC for an advance payment up to four weeks before the first statutory payment is due if you cannot afford to pay upfront, so your employee receives their pay on time while you wait for the relief funds.

Key takeaways

• Verify your eligibility for Small Employers' Relief by ensuring your business made Class 1 National Insurance contributions of £45,000 or less in the tax year before your employee's qualifying week to claim 103% of statutory parental payments.
• Automate your Small Employers' Relief claims through payroll software to calculate relief amounts and submit Employment Payment Summaries to HMRC monthly, rather than waiting until the new tax year for manual repayments.
• Recognise that Employment Allowance and Small Employers' Relief are separate schemes, with Employment Allowance not counting towards the £45,000 threshold for SER qualification.
• Apply for advance payments from HMRC up to four weeks before the first statutory payment is due if you cannot afford to make the payments upfront, ensuring your employee receives timely support while you await relief.

What is Small Employers' Relief?

Small Employers' Relief (SER) is a UK government scheme that lets qualifying businesses reclaim 103% of statutory parental payments. You get back the full amount you paid, plus an extra 3% to cover your administrative costs.

The scheme covers statutory maternity pay, paternity pay, adoption pay, shared parental pay, and parental bereavement pay.

If you run a small business, this relief improves your cash flow by reducing the cost of statutory payments.

Businesses that don't qualify for SER can usually reclaim 92% of employees' statutory payments, including maternity, paternity, adoption, and shared parental pay.

Do I qualify for Small Employers' Relief?

You qualify for Small Employers' Relief if your business paid £45,000 or less in Class 1 National Insurance contributions in the last complete tax year before your employee's qualifying week or matching week.

Qualifying weeks vary by leave type:

• Maternity leave: the 15th week before the expected due date
• Adoption leave: the week the employee received matching notification from an adoption agency
• Overseas adoption: the date shown on the official notification for international adoptions
• Parental bereavement: the week before the child's death or stillbirth

You can find out more about Small Employers' Relief eligibility here.

The definition of a small employer is based on your National Insurance contributions.

What counts as a 'small employer'?

A small employer is any business that paid £45,000 or less in gross Class 1 National Insurance contributions during a full tax year.

This calculation includes both employee and employer contributions. It excludes Class 1A, Class 1B, any NICs rebate, and any Employment Allowance claimed.

What statutory payments are covered by Small Employers' Relief?

Small Employers' Relief covers five types of statutory parental payments:

• statutory maternity pay (SMP)
• statutory paternity pay (SPP)
• statutory adoption pay (SAP)
• statutory shared parental pay (ShPP)
• statutory parental bereavement pay (SPBP)

This lets you support employees during major life events while reclaiming the cost from HMRC.

How much Small Employers' Relief can you claim?

The amount you can reclaim depends on your business size:

• Small employers (£45,000 or less in National Insurance contributions): reclaim 103% of statutory payments, which includes the full amount plus 3% for administrative costs
• Larger employers (over £45,000 in National Insurance contributions): reclaim 92% of statutory payments

The 11% difference can add up to significant savings when employees take extended parental leave.

Rate changes can affect how much you claim.

Small Employers' Relief rate changes for 2025–26

For the 2025–26 tax year, the government increased the Small Employers' Relief compensation rate, meaning small employers can now reclaim 108.5% from HMRC. Your payroll software should apply the new rates automatically once they take effect.

Staying current with rate changes ensures you claim the correct amount each pay period. Check the HMRC website or your payroll provider for the latest figures.

Once you know how much you can claim, you'll need to submit your claim to HMRC.

How do you claim Small Employers' Relief?

Payroll software automates your SER claims by calculating relief amounts and submitting them to HMRC each month.

The process works like this:

• your software calculates the relief you're entitled to claim
• your software includes the relief amount in your Employment Payment Summary (EPS)
• your software submits the EPS to HMRC automatically

If you already use cloud-based accounting software with payroll features, you can process statutory payments and claim relief through the same system.

Alternative method: You can write to HMRC to request a manual repayment. However, you must wait until the start of the new tax year to submit this request.

You can find out more about claiming SER without software on the HMRC website.

If you use Xero, the process is straightforward.

How to claim Small Employers' Relief through Xero

Xero automates your SER claims by calculating relief amounts and submitting your EPS to HMRC monthly.

To enable Small Employers' Relief in Xero:

1. Select 'Payroll', then navigate to 'Payroll Settings'
2. Click on the 'HMRC' tab
3. Find 'Are you eligible for Small Employers' Relief?' and select 'Yes'
4. Click 'Save' to activate automatic SER processing

Understanding how SER interacts with other schemes helps you maximise your claims.

Small Employers' Relief and Employment Allowance

Employment Allowance and Small Employers' Relief are separate schemes that work independently. Any Employment Allowance you claim does not count towards the £45,000 National Insurance threshold for SER, which is especially important to note since the government will increase the Employment Allowance to £10,500 for the 2025–26 tax year.

Example 1: Not eligible

• Employment Allowance claimed: £5,000
• Class 1 National Insurance contributions: £47,000
• Result: not eligible for SER because £47,000 exceeds the threshold

Example 2: Eligible

• Employment Allowance claimed: £5,000
• Class 1 National Insurance contributions: £42,000
• Result: eligible for SER because £42,000 is below the threshold

To learn more about Employment Allowance and what you could be entitled to, read our guide.

Additionally, as a small business, if you're working within the sciences or technologies you could also benefit from research and development (R&D) tax credits.

Effective claim management supports your business finances.

Managing cash flow with Small Employers' Relief

Managing SER claims through your payroll software helps maintain healthy cash flow and reduces time spent on admin.

Xero Payroll calculates Small Employers' Relief automatically, so you can focus on growing your business. Get one month free and see how automated relief claiming works.

For more ways to manage your business finances, explore our cash flow advice hub.

Have more questions? See the answers to common queries below.

FAQs on Small Employers' Relief

Find answers to common questions about SER eligibility, advance payments, and how compensation works.

What happens if my National Insurance contributions are just over the £45,000 threshold?

The £45,000 threshold is a fixed limit that must be met exactly. If your National Insurance contributions were £45,001, you won't qualify for the 103% rate.

You can still reclaim 92% of statutory payments as a larger employer.

Can I get an advance payment from HMRC if I can't afford to make statutory payments?

Yes, you can apply to HMRC for an advance payment up to four weeks before the first statutory payment is due.

This ensures your employee receives their pay on time while you wait for the relief funds.

How is the additional 3% compensation paid?

The 3% compensation is applied as a tax credit. When you submit your EPS, the full 103% is deducted from the PAYE and National Insurance you owe HMRC that month.

If your relief exceeds what you owe, HMRC will pay the difference to you.

What if I missed claiming Small Employers' Relief in previous months?

You can still claim the relief even if you missed it in previous months. Submit an earlier year update or adjust your current payroll reporting to include the missed amounts. Your payroll software can often handle these past adjustments for you.

How long does it take to receive the relief after claiming?

HMRC usually applies the relief immediately as a reduction to your monthly PAYE and National Insurance bill. If your relief amount is higher than your tax bill, you can request a repayment from HMRC, which typically takes a few weeks to process.