NIM01405 - Class 1 structural overview: Zero-rate of contributions for Armed Forces Veterans: background
At Budget 2020 the Chancellor announced a new secondary Class 1 National Insurance contributions relief for the employers of veterans.
This relief provides a zero-secondary Class 1 NICs rate on the earnings of Veterans for 12 months, starting from the first day of a Veterans first civilian employment after leaving HM Armed Forces. Subsequent and concurring employers can benefit from this relief for that period. To qualify, a Veteran must have completed at least one day of basic training in HM regular Armed Forces. This relief was initially available to employers between 6 April 2021 and 5 April 2024. Following an announcement at Autumn Statement 2023, availability of the relief was extended for a further year and is now also available from 6 April 2024 to 5 April 2025.
From 6 April 2022, employers are able to claim this relief in real time by applying a NIC category letter.
From 6 April 2021 to 5 April 2022, transitional arrangements were in place so that employers can claim the relief for that period from 6 April 2022 onwards.
The secondary Class 1 rate of National Insurance is 0% for employers of Veterans. The 0% rate will apply to earnings between the Secondary Threshold (ST) and the Veterans Upper Secondary Threshold (VUST).
See NIM01425 for further information about the VUST.
See NIM01415 for the definition of what constitutes a qualifying Veteran.
The change will apply to new and existing veterans.
A new category letter (see NIM01430) has been introduced from the 2022 to 2023 tax year to correctly assess Class 1 NICs for Veterans.
Where the zero-rate of secondary Class 1 NICs applies the employer will remain a secondary contributor even if earnings are below the VUST. This means they will continue to be required to meet all secondary contributor obligations, including paying the apprenticeship levy and any statutory payments due (if they are the liable employer).
The earnings will still remain part of the secondary contributor’s pay bill for the purposes of Apprenticeship Levy (see ALM07000).