Good news for small businesses: the Small Employers’ Relief (SER) rate will increase to 9% commencing 6 April 2026 (tax year 2026-27). If eligible, you may recover 109% of statutory family-related payments, encompassing 100% of statutory pay along with an additional 9% compensation, to assist in offsetting employer National Insurance contributions and administrative costs. What Is Small Employers’ Relief? Small Employers’ Relief assists eligible small employers in recouping the costs associated with specific statutory family-related payments made to employees during periods such as maternity, paternity, adoption, shared parental, bereavement, or neonatal care leave. Employers are legally obligated to disburse these statutory amounts via payroll. If your business qualifies, you are entitled to reclaim 100% of the statutory payments, along with an additional compensation percentage to help offset employer costs, including employer National Insurance contributions and administrative expenses. Effective from 6 April 2026, this compensation rate will increase to 9%, allowing for the recovery of 109% of the statutory pay. Who Can Claim This Relief? Your business qualifies if it paid £45,000 or less in Class 1 National Insurance contributions during the last complete tax year. This eligibility threshold remains unchanged. Importantly, the £45,000 limit is based on the previous tax year’s NICs, not the current year’s. For example, if you claim relief in 2026-27, HMRC will review your 2025-26 Class 1 NICs to determine qualification. Eligibility depends solely on your total Class 1 NIC liability, not on the number of employees. Which Payments Are Covered? Small Employers’ Relief applies only to statutory family-related payments. If you qualify, you can reclaim these payments at 109% (from April 2026): If you meet the eligibility criteria, you can reclaim 100% of these statutory amounts plus the additional compensation percentage. Not covered: What the 9% Increase Actually Means From 6 April 2026, eligible employers can reclaim 109% of qualifying statutory family-related payments under Small Employers’ Relief through HM Revenue and Customs. This means you recover: The additional percentage helps offset employer costs associated with administering these payments, such as employer National Insurance contributions and payroll processing. Example Your employee receives £2,150 in Statutory Maternity Pay (SMP). You can reclaim: So, you receive £193.50 more than the statutory amount paid, improving short-term cash flow. How Do You Actually Claim It? You claim Small Employers’ Relief through your normal payroll reporting process: there is no separate application form. If you use payroll software Most payroll software calculates the reclaim automatically. It reports the statutory payments and the Small Employers’ Relief through your payroll submissions and offsets the amount against your PAYE and National Insurance liability. If you calculate payroll manually You must: Record-keeping Keep clear payroll records for each employee, including: These may be required during an HMRC compliance check. When Your Reclaim Is More Than You Owe If your reclaim exceeds your PAYE/NIC liability for that period, you can: (Processing times for refunds vary.) Getting Ready for April 2026 The new Small Employers’ Relief compensation rate of 9% takes effect from 6 April 2026. Preparing in advance will help ensure your payroll calculations and reporting remain accurate from the start of the new tax year. Essential steps Consider Cash Flow Timing Although eligible employers are permitted to reclaim an amount exceeding the statutory payment, there may be a brief delay between disbursing payments to employees and offsetting or recovering the reclaim through payroll. If multiple employees are on leave concurrently, it is advisable to ensure sufficient funds are available initially until the reclaim is processed or offset against your PAYE/NIC liability. Mistakes Small Employers Often Make Avoid these common errors when claiming Small Employers’ Relief: How The Infinity Group Can Help Managing payroll legislation, statutory payments, and reclaim rules can prove to be time-consuming and complex endeavours. The Infinity Group provides support to small and expanding companies by offering expert guidance, timely compliance updates, and comprehensive outsourced payroll services. Our services encompass: Whether you require complete payroll outsourcing or continuous technical assistance, we offer dependable, compliant solutions tailored specifically to your business. Subscribe to Our Newsletter for Weekly Updates!