Processing employer National Insurance relief through payroll

03 August 2021

A National Insurance (NI) relief for employers who took on veterans was introduced from 6 April 2021, and there is also going to be a reduction for employers who are based in Freeports from 6 April 2022 – but how will this be processed through payroll? Read on to find out more.

NI holiday for employers of veterans

This relief has been available from 6 April 2021, however, for the first year of the policy’s implementation, eligible employers have been required to pay the associated Secondary Class 1 National Insurance Contributions (NICs) as usual and will need to claim it back from April 2022. 

From April 2022 onwards, employers will be able to claim the relief through Real Time Information (RTI). This will be through the introduction of a new veteran specific NIC letter – V. This new category will mirror existing category A. If there are scenarios where the veteran employee would normally sit under another NIC category letter, for which there is no veteran equivalent (B, T, C, W, J, Q) then the existing category should be applied for the tax year. Where the employer is also eligible for veteran relief, they will need to contact HMRC at tax year end to set up a manual process for the relief to be claimed.

A new Veterans Upper Secondary Threshold (VUST) will be created. Where a veterans’ earnings are above the VUST, the employer relief can be applied on the element of the earnings below the VUST. 

The software developer guide on this NICs relief can be accessed here. 

Freeports employer NICs relief

The government intends to create up to 11 Freeports in various locations within the UK. From 6 April 2022, a reduced rate of employer NICs will apply to all Freeport based businesses. This will mean all employers based within and employing people working within the Freeport geographic area can apply a zero-secondary rate of employer NICs for those employees’ earnings above the secondary threshold up to and including a newly established Freeport Upper Secondary Threshold (FUST). Anything above this rate will be charged at 13.8%. It is expected that the FUST for tax year 2022-23 will sit at £25,000.

To be eligible, the employee must be a new hire after April 2022 and must not have worked for that employer (or a business connected to that employer) in the previous 24 months. They must also spend a minimum of 60% of their time working within the Freeport tax site. 

Not one, but four, new Freeport NIC category letters are to be introduced:

•    F – standard category letter
•    I – married women and widows entitled to pay reduced NICs
•    S – employees above state pension age
•    L  - employees who defer paying 12% NICs, only paying 2% because they are paying it in another job

The new category letters reflect existing NIC category letters A, B, C and J.

In the extremely rare circumstance that the employer has an employee for whom they would use a different NIC category letter (the example of Mariners is provided), then they would need to contact HMRC at the end of the tax year to establish a manual process by which to calculate and claim the relief.

The software developer guide on this NICs relief can be located here.

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