Employer NI reliefs for young staff, veterans and freeports

Employers pay 0% secondary Class 1 National Insurance, instead of 15%, on earnings up to a higher threshold for four groups: employees under 21, apprentices under 25, veterans in the first 12 months of their first civilian job, and new employees who spend at least 60% of their time at a Freeport or Investment Zone special tax site. The threshold is £50,270 a year for the first three and £25,000 for special tax sites in 2026 to 2027. Each relief is claimed through the payroll category letter, and HMRC expects you to hold evidence that the conditions were met.

Which reliefs are available and how much do they save?

Relief	Legal basis	0% up to (2026 to 2027)	How long	Letters
Employees under 21	SSCBA 1992 s.9A	£50,270 a year	Until the 21st birthday	M, Z
Apprentices under 25	SSCBA 1992 s.9B	£50,270 a year	While an apprentice and under 25	H
Armed forces veterans	NICA 2022 ss.6 and 7	£50,270 a year	12 months from first civilian job	V
Freeport and Investment Zone special tax sites	NICA 2022 ss.1 and 2	£25,000 a year	Up to 36 months of the employment	F, I, L, S and N, E, D, K

Above those thresholds the normal 15% applies, and without a relief employers pay 15% on earnings above the secondary threshold of £5,000 a year. None of the reliefs touches the employee’s own contributions. The National Insurance category letters guide shows how each letter is reported.

The law treats the employer as still liable for a contribution of £0 (for example section 9A(6) and section 9B(3) of the SSCBA). CWG2 confirms the earnings remain part of the employer’s pay bill for the Apprenticeship Levy, and all the usual employer duties, such as statutory payments, continue.

What do you need for the under 21 relief?

Only the employee’s age. Section 9A sets a 0% age related secondary percentage for earners under 21. HMRC’s CWG2 makes the employer responsible for holding the correct date of birth and switching letter on time: a payment made on or after the 21st birthday uses category A, or J if the employee defers. Keep the date of birth from the starter information on file.

What makes someone an apprentice for the under 25 relief?

Section 9B defines a relevant apprentice as someone aged under 25 employed as an apprentice. CWG2 adds the practical test: the apprentice must be following a UK government recognised apprenticeship standard or framework for England, Scotland, Wales or Northern Ireland, and there must be a written agreement naming that standard or framework with a start date and expected completion date. HMRC says the agreement between the training provider, apprentice and employer is the evidence to keep.

Points to watch: if someone qualifies as both under 21 and an apprentice, CWG2 says to use the apprentice rate (H); there is no deferment letter for apprentices; and H must stop when the apprenticeship ends or on the 25th birthday, even if the person stays with you.

How does the veterans relief work?

Section 7 of the National Insurance Contributions Act 2022 sets three conditions: the earner served at least one day in the regular forces, the job is civilian, and the earnings are paid in the year starting on the first day of the earner’s first civilian employment since they last left the regular forces. HMRC’s guidance describes the service test as at least one day in the regular forces or one day of basic training. Section 6(4) lists the tax years covered, which currently run to 2027 to 2028.

The 12 month period is fixed. It does not restart if the veteran changes job, so a second employer can claim only for what is left of it and has to find out when the first civilian job began. A veteran with two jobs at once can have the relief claimed by both employers. It applies however long ago the person left the forces, as long as this is their first civilian job.

Evidence: HMRC says you need records showing that the employee is a qualifying veteran and the start date of their first civilian employment, kept for at least 4 years. Acceptable documents include discharge papers, the identification card showing service, a letter of employment or contract with HM Armed Forces, the P45 from leaving the forces and, for later employers, the contract from the previous civilian job.

There are no veteran versions of categories B, C or J. For those employees you keep the usual letter and write to HMRC after the end of the tax year, to BX9 1AN for one employee or BX9 1BX for several, giving the employee’s details, the period, the bank account for the refund and confirmation that you hold evidence.

What are the Freeport and Investment Zone conditions?

The site must be a designated special tax site and you must have business premises in it. Public authorities cannot claim. For each employee:

• the employment must have started on or after 6 April 2022 and before 30 September 2031 for English Freeport sites, or 30 September 2034 for Scottish Green Freeport, Welsh Freeport and Investment Zone sites
• you must reasonably expect them to spend at least 60% of their working time in a single special tax site
• they must not have been employed by you or a connected employer in the previous 24 months (connection is tested under section 993 of the Income Tax Act 2007)
• relief runs for up to 36 months from the start of the employment, for the periods when the conditions are met

If working arrangements change substantially you must reassess, and stop claiming once you no longer expect the 60% test to be met. Where you have adjusted an employee’s time on site because of disability, pregnancy or maternity, the 60% rule is treated as met. You must report the employee’s workplace postcode on the Full Payment Submission (see RTI, the FPS and EPS) and keep evidence of the conditions and of any exception relied on.

What is the saving in practice?

Illustration only. Two new employees are each paid £3,000 a month in 2026 to 2027. Without relief the employer pays (£3,000 less the £417 monthly secondary threshold) at 15%, which is £387.45 a month.

• One is a veteran in their first civilian job. Pay is below the monthly veterans threshold of £4,189, so the employer pays nothing for the 12 month period, saving £4,649.40 if the whole year falls inside it.
• The other works at a Freeport special tax site. The employer pays 15% only above the £2,083 monthly Freeport threshold: £917 at 15% is £137.55 a month, saving £249.90 a month.

Any liability left after these reliefs can still be reduced by the Employment Allowance, which is £10,500 for 2026 to 2027 for eligible employers.

What will HMRC look for?

In an employer compliance check, HMRC will ask for the evidence behind each category letter. The common failures are:

• M or Z continuing after the 21st birthday, or H after the apprenticeship ends or the 25th birthday.
• H used for a trainee who is not on a recognised standard or framework, or with no written agreement on file.
• V used beyond 12 months from the first civilian job, or by a later employer that never checked the start date.
• Special tax site letters used for hybrid staff who do not meet the 60% test, or for people rehired within 24 months.

Underpaid contributions from earlier years are corrected through payroll; see correcting payroll errors from earlier years.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

Related Accountapedia entries

• Freeport and investment zone tax reliefs
• Employer National Insurance at 15%: how it works
• National Insurance after State Pension age
• Training apprentices in an accountancy practice
• Paying someone after they have left: the 0T code

Related cover: Employers liability insurance: the legal requirements and Employers liability vs public liability.

Sources

• legislation.gov.uk: Act 1992 c. 4, section 9A
• legislation.gov.uk: Act 1992 c. 4, section 9B
• legislation.gov.uk: Act 2022 c. 9, section 6
• legislation.gov.uk: Act 2022 c. 9, section 7
• legislation.gov.uk: Act 2022 c. 9, section 2
• legislation.gov.uk: Act 2022 c. 9, section 1
• GOV.UK: Rates and thresholds for employers 2026 to 2027
• GOV.UK: 2026 to 2027 employer further guide to paye and national insurance con
• GOV.UK: Claim national insurance contributions relief for veterans as an emplo
• GOV.UK: Check if you can claim national insurance relief in uk freeport or inv

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.