As an employer you may be able to claim relief on some of your National Insurance Contributions (NICs). This can go a long way in reducing your tax bill – and let’s face it, few of us want to miss out on that. In this article we’ll explain what relief is available to help employers with their National Insurance bill.
The bit that they contribute themselves, known as Class 1 (Primary) National Insurance. Their employer deducts the contribution from their wages and pays it on to HMRC on their behalf. It’s charged at a rate of 12% on earnings between £12,570 and £50,270, and 2% on earnings above £50,270.
The bit that their employer contributes is Class 1 (Secondary) NI. In 2023/24 employers make NI contributions at a rate of 13.8% on earnings above £9,100
On that note, we’ll go through what relief might be available to help you with your National Insurance bill.
The Employment Allowance for employer’s NICs
The Employment Allowance is an annual allowance that you can claim towards the cost of paying Class 1 National Insurance as an employer.
The Employment Allowance for 2023/24 is £5,000
This means you can claim up to a maximum of £5,000 in a year. The reduction will apply every time you run your payroll, and will carry on until either the tax year ends, or you use up your £5,000 allowance (whichever is sooner). You don’t have to use the whole amount every year, but that’s the maximum you can claim.
Am I eligible for Employment Allowance?
You’ll normally be able to claim relief on your NI bill using the Employment Allowance as long as:
You have at least 1 employee, or 2 or more directors, with a salary above the Secondary Threshold (£175 per week, or £9,100 a year for 2023/24)
Your bill for employer’s NI contributions was no more than £100,000 in the previous tax year
Charities, care and support organisations, and amateur sports clubs can also claim the Employment Allowance. The rules are strict though, so unless they’re a charity, you’ll find that businesses and public bodies carrying out more than half of their work in the public sector are unable to claim.
If you employ a veteran, then you might be able to claim relief on the employer’s NI contributions you make on their earnings. The relief is available as a zero rate of employer’s NI for a 12-month period, which starts on the employee’s first day in a civilian job after leaving the armed forces.
Bear in mind that a job with a reserve organisation is not classed as civilian employment, and isn’t eligible.
It doesn’t matter which area of the armed forces they served in, or how long ago they left, as long as they served at least one day in the regular armed forces or of basic training. The relief is applied in real-time, so you won’t need to claim it back retrospectively.
What if a veteran moves to a new employer?
The qualifying 12-month period isn’t tied to one employer, so once the clock starts ticking, veterans can move jobs or work for more than one employer at a time. Employers will need to make sure they find out the date that their new worker was first employed in a civilian role though.
Is there a limit on earnings?
NIC relief for veterans will apply on earnings up to the Veterans Upper Secondary Threshold (UST), which in 2023/24 stands at £967 per week (£50,270 per year).
If your employee is ex-armed forces and earns more than this, the relief will be applied to their earnings up to that threshold. There’s more information available about NICs when employing veterans on the Gov.uk website.
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Hiring employees under the age of 21
A change to the law back in April 2015 means that employers hiring anyone under the age of 21 no longer have to pay NICs on their earnings up to the Upper Secondary Threshold (£50,270 per year in 2023/24).
This means that employers don’t make NI contributions for workers who are:
20 or younger, and;
Earning less than the Upper Secondary Threshold for NI
If the employee earns more than the UST, employers will need to pay Class 1 secondary NICs.
Are there any exceptions?
As ever with tax and NI, there are some exceptions, and this type of relief isn’t available for:
Class 1A NICs (the National Insurance that employers pay on any benefits in kind)
Class 1B NICs (contributions which employers make on items included within a PAYE settlement agreement)
The government is aiming to create a number of Freeports as part of its levelling up agenda. These Freeports are to be located in some of the UK’s less affluent communities as a way of boosting employment and local economic prosperity.
As a way to encourage businesses to set up in one of these Freeports, the government is offering employer NIC relief for all new employees hired after 6th April 2022.