Employers National Insurance Holiday

Potential National Insurance savings for new business – up to £50,000

Who can claim

New business started in period 22 June 2010 to 5 September 2013
Business based in designated areas in the UK including Yorkshire & Humberside but excluding certain specified areas (broadly, it excludes London, the South East and East England).
Applies to most categories of businesses, including sole traders, partnerships and companies, and includes property businesses and investment businesses, but is not available to existing partnerships and sole traders who incorporate.
Certain types of businesses are excluded or may be restricted, including Managed Service Companies, road freight transport companies, businesses involved in export-related activities or in agriculture

Reduction in Employer National insurance payable

For first ten employees (including directors and employees earning below the NI limit) employed in the first twelve months.
No Employer Class 1 NI contributions for the first year of employment, up to a limit of £5,000 per employee
For national insurance from 6 September 2010 to 5 September 2013

Procedure

The employer must make a claim (the agent/accountant cannot do this on the client’s behalf)
The new business must register as an Employer before applying for an NIC holiday
Most businesses can apply online
If the Employer qualifies, HMRC will send email confirming the NIC holiday, which must be kept for three years.
Can either claim not to pay national insurance, or claim a repayment of national insurance paid previously
Calculate NI as normal, but then reduce amount paid to HM Revenue & Customs
Need to keep records and complete an NIC holiday end-of-year return
The legislation won’t be in place until c January 2011, so there is an official legal disclaimer. If the rules change, you may have to pay over NI you expected to be covered by the holiday.

Considerations

The administration costs of the scheme may outweigh the NI savings if earnings for all the employees are about the lower limit for NI.
Consider order in which employees are taken on, if relevant, so that higher paid employees are within the first ten employees.
If paying bonuses or irregular salary payments to employees, may wish to pay these within the first 12 months.

Further information