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Which employees attract national insurance incentives for employers?

6 June 2022
Mark Friend
Reducing Tax, Payroll, People

From 6th April 2022 employer NI increased to 15.05%. It is therefore essential that employers know which types of employees attract national insurance incentives.

For an employee earning £20,000 a year the employer NI cost is usually £1,640. There is an employment allowance (£5,000 from 6th April 2022) which can be claimed by most employers to set against their employer NI costs. This negates part of the cost, however for employers with say two to three team members it doesn’t take much to fully utilize the allowance, making the cost of each additional employee you take on more expensive with the increase in employer NI.

This article looks purely at the NI savings available and takes no account of employment legislation. If you are looking for new employees we would always recommend you take advice from your human resources adviser, particularly in respect of any jobs advertised and recruitment in general.

However putting employment law to one side there are a number of employee groupings that result in significant employer national insurance savings. The savings will be dependent on their NI coding and the ones where there are savings can be found here.

One key group where there are no employer NI savings is pensioners. Pensioners have NI coding C which means no NI is paid by the employee. Employer’s NI is still payable by the employer.

The key groupings where there are national insurance savings for employers are:

H             For employees under the age of 25 years old and working in an approved UK government statutory apprenticeship framework (frameworks can differ depending on the UK country).

V             A veteran – only available for their first 12 months in employment once they have left the armed forces.

M            For employees under the age of 21 years old.

X             For employees under 16 years old who do not have an NI number.

There are also savings for employers engaging team members who work in freeports.

For H, V and M the employer pays no employer’s national insurance for any earnings up to the upper earnings threshold (£50,270 per annum for 2022/23).

A word of warning.

Firstly, always double check that the employee qualifies. Code M is obvious but be careful if you use H or V. Make sure you have the right facts. Secondly, if any employee falls under the above categories please make sure you check that the correct coding is being applied. The tax codes are not provided by HMRC. They are determined by the employer. It is essential that you regularly check employee tax codings. Errors can easily occur such as when an employee comes off an apprenticeship scheme!

If you are a client of Friend & Grant and need further advice on the above then please contact your client manager. If you are not a client of Friend & Grant and would like us to assist you with your payroll then please complete the “take the next step“ form on this page.

The content in this blog is correct as at 6 June 2022. See terms and conditions.

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