A one year employer National Insurance contributions (NICS) holiday for small businesses to employ Armed Forces veterans was introduced on 6 April 2021, following successful campaigning by the Federation of Small Businesses and X-Forces Enterprise.
How does the National Insurance contributions holiday work?
The relief is available for 12 consecutive months from the veteran’s first day of civilian employment and can be applied up to the upper secondary threshold.
Until March 2022, you’ll need to pay Class 1 National Insurance contributions as normal, and then claim it back from April 2022. From April 2022, the relief will be applied through PAYE. The Government will be publishing further guidance on how the claim process will work closer to the time.
How will this benefit small businesses and veterans?
“Service leavers have a huge amount to offer civilian employers, and we’d urge every small employer to consider the value this relief can bring in helping them take on a new member of staff,” said Mike Cherry, FSB National Chairman. “We’ve been pleased to work with Government, and in partnership with X-Forces Enterprise, on creating this relief, giving a helping hand to firms that can employ service leavers.”
FSB’s report A Force For Business, published in 2019 and supported by X-Forces Enterprise, found more than one in ten (12%) of Britain’s small businesses have employed an Armed Forces veteran in the last three years, with manufacturing the most common sector (20%) followed by Wholesale, Retail and Repair (15%) and Professional, Scientific and Technical (11%).
Among those employing veterans, the benefits they have found include resolving skills shortages (35%), improving team performance (27%) and providing fresh perspectives and creative ideas (26%).
Can I claim this relief?
- Your employee qualifies as a veteran (served at least one day in regular armed forces or one day of basic training).
- You employ a veteran who has not previously been employed in civilian capacity, regardless of when they left the regular armed forces.
- Any civilian employment.
Who can’t claim?
As the self-employed don’t pay Class 1 National Insurance contributions, self-employed businesses don’t qualify for this relief.
What is the qualifying period?
This starts on the first day of the veteran’s first civilian employment (in the employment contract), running for 12 months. The relief can be claimed if the qualifying period started before 6 April 2021, but is only applicable to the 12-month period.
Is there a limit?
- It applies to the eligible earnings of veterans up to the upper secondary threshold, which for the 2021/22 tax year is £967 per week or £4,189 per month (employers of employees who are under 21 pay zero-rate up to this point).
- If earnings are above this, the relief can be applied to the earnings below the threshold
What records do I need to keep?
Records of eligibility must be kept for at least three years after the end of the tax year they relate to. This includes:
- Documents to show that your employee qualifies as a veteran, such as their veteran’s identification card or employment contract, P45 or discharge papers from HM Armed Forces.
- Start date of first civilian employment (this may be with another employer, so you’ll need their previous employment contract to confirm).
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