Employers can claim National Insurance Contributions (NICs) relief for any Armed Forces veteran they employ in their first civilian job after serving.
What are the details of this new NICs relief?
This new National Insurance Contributions relief is applicable to employers who give someone their first civilian job after they leave the military.
- It lasts for up to 12 consecutive months from the day they start work for you
- NICs relief is applicable up to the upper secondary threshold. If they earn over this amount, this relief can be applied to everything earned under the threshold.
- It starts from April 2021
- For the 2021-22 tax year, employers pay Class 1 NICs as usual, then claim them back from April 2022
Who is eligible for the NICs tax relief?
Any civilian employer can apply for NICs tax relief on veterans they employ in their first civilian job, post service. Someone is considered a veteran if they have served at least one day in the regular armed forces.
It doesn’t matter how long ago they left their military job, as long as they haven’t been employed in any other civilian workplace. For example, you have an applicant that left the Navy five years ago. She subsequently had a baby and has been a homemaker until now. She’s still eligible because she hasn’t been employed in any other civilian job since she left the Navy.
It’s up to you as an employer to make sure the person has genuinely served in the military. As stated in the HMRC Guidance for this tax relief, you can use any of the following official documents as confirmation:
- “veteran’s Identification card (which marks their time in the armed forces)
- letter of employment or contract with HM Armed Forces
- veteran’s P45 from leaving HM Armed Forces
- discharge papers from HM Armed Forces
- the employment contract of an individual’s previous employment (in order to determine the start date)”
You must keep all the records proving eligibility for at least three years after the relevant tax year.
Why has the government brought in this NICs relief for employers of veterans?
Most ex-serving members of the armed forces settle into productive civilian work. But others find it more difficult, for a range of reasons. One of them being the negative assumptions made about people who have been on active service.
In an HMRC press release, Johnny Mercer, Minister for Defence, People and Veterans, said:
“Veterans have an immense range of skills and unique experience to bring to civilian life. This National Insurance contributions holiday will reward employers for backing our veterans, while also extending employment opportunities for many talented veterans in this country.”
Rishi Sunak, Chancellor of the Exchequer, said: “Today marks another milestone in this government delivering on its promises. We will always support our veterans, who have risked their own lives to keep our country safe, and this tax cut will give them a crucial helping hand getting them into the workplace after leaving service.”
And this relief is welcomed by the business community, with Mike Cherry, FSB National Chairman, saying: “This is a loud and clear declaration of support for veterans employment and it’s fantastic to see this announcement from the OVA today. 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. We’ve been pleased to work with Government and X-forces on this relief, giving a helping hand to firms supporting service leavers and boosting job opportunities at this admittedly difficult time for businesses.”
For this tax year, it does mean paying Class 1 NICs as usual and claiming them back next year. But that’ll be a welcome tax rebate at the start of the new tax year. From 2022, HMRC intend to make this applicable in real time through PAYE.