As an employer, you might be eligible for relief on some of your National Insurance Contributions (NIC). This can significantly lower your tax burden and might be crucial given that every firm is currently experiencing escalating prices.
How much do businesses contribute to national insurance?
Employers contribute to national insurance on the salary and benefits they provide to their staff. As a result, an employee’s NI is divided into two parts:
- The portion of their contributions that they make themselves and which their employer withholds from their pay and sends to HMRC on their behalf Class 1 (primary) NI is what this is known as, and it is assessed at a rate of 12% on earnings between £12,570 and £50,270 and 2% on incomes beyond £50,270.
- Their employer’s portion is classified as Class 1 (secondary) NI. Employers’ NI is paid at a rate of 13.8% on incomes over £9,100.
Let’s discuss the many forms of relief for your employer’s National Insurance expense.
Employment Benefits
You can deduct your annual Employment Allowance from your employer’s Class 1 National Insurance. It can reduce your bill by up to £5,000 a year, which can be beneficial in these difficult economic times.
Every time you process payroll, the reduction will be applied, either until the end of the tax year or until your £5,000 allowance has been used (whichever is sooner). Although you are not required to use the entire amount each year, it is the most you can deduct.
Does Employment Allowance apply to me?
- You ought to be qualified to apply for Employment Allowance if you can:
- You have at least one employee paid more than the secondary level (or if your business is a limited company, two or more directors are born more than the second threshold).
- You paid no more than £100,000 in employer NI contributions during the prior tax year.
The Employment Allowance is also available to nonprofit organisations, care and support groups, and amateur sports leagues. The regulations are stringent, so companies and government entities that perform more than 50% of their work in the public sector are not eligible to claim benefits unless they are charities.
Find out more details about the Employment Allowance Changes.
Veteran employers receive NI assistance.
If you hire a veteran, you may be eligible to get reimbursement for the employers’ national insurance contributions you make based on their salary. The relief is offered as a 12-month term with a 0% employers’ NI rate that begins on the employee’s first day after leaving the military.
Remember that employment with a reserve organisation is not considered to be “civilian employment” and is therefore ineligible.
It makes no difference what part of the military they were in or how long ago they left, as long as they served in the regular armed forces or basic training for at least one day.
What if a veteran goes to work for a different company?
Once the clock starts, veterans can simultaneously change jobs or work for more than one employer. Employers will need to find out when their new worker started working in a civilian job for the first time.
Is there a cap on your earnings?
NIC relief will be given to veterans who make up the Upper Secondary Threshold (UST). If your employee is a former member of the armed forces and makes more than this, the relief will only be applied to their income up to this point.
On the Gov.UK website, you can learn more about NICs when you hire a veteran.
Hiring people who are younger than 21
Since April 2015, when the law changed, employers who hire people under 21 are no longer supposed to pay National Insurance Contributions (NICs) on their earnings up to the Upper Secondary Threshold.
This means that employers don’t pay National Insurance for employees who:
- If you are under 20 and make less than the Upper Secondary Threshold for NI, you can get NI.
- If the employee makes more than the UST, the employer must pay Class 1 secondary NICs.
Do you know of any exceptions?
As is always the case with taxes and National Insurance, some people can’t get this kind of relief:
- NICs of Class 1A (the NI that employers pay on any benefits in kind)
- NICs of Class 1B (contributions that employers make on items included within a PAYE settlement agreement)
If you do your payroll, it’s a good idea to check your system often to ensure you’re using the correct tax codes and national insurance categories.
Most workers will fall into NI category A, but most workers under 21 will fall into category M. You’ll need to put the employee’s tax code and NI category on their pay stubs.
Freeports National Insurance relief for employers
As part of its plan to make things fair, the government wants to set up several Freeports. These Freeports will be set up in some of the UK’s poorer areas to create more jobs and strengthen the local economy.
To get businesses to move into one of these Freeports, the government is giving all new employees hired after April 6, 2022, relief from employer NIC.
A new “Freeport Upper Secondary Threshold” (FUST) has been set at $25,000. This means employer National Insurance Contributions (NIC) won’t be charged for anything under this amount.
How can I tell if my workers are qualified?
To qualify, your employees must:
- Be new employees who started work between April 6, 2022, and April 6, 2026, and spend at least 60% of their work time at the Freeport tax site during their first three years on the job.
- There are some exceptions to this, like maternity leave or being sick.
- Have not worked at another Freeport site or a site connected to Freeport in the last two years.
Please find out more about our business accounting services or call us at 0113 8870 218 or 0121 7268 542. Remember that you can also get a quote immediately online.
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