Keen to hire ex-military talent?
From problem-solving to strategic management, veterans possess invaluable skills for today’s job market.
Many veterans are trained in highly technical roles such as project management, engineering, logistics and people management.
This, coupled with in-demand soft skills such as teamwork and motivation, means employees with an armed forces background are well-placed to take on current skill gaps employers are struggling to fill.
Fortunately, the UK government has introduced a NIC relief to incentivise companies to hire more veterans.
We'll go into what the veteran NIC relief is and how you can claim it for the 2021-22 tax year and onwards.
What is National Insurance relief for veterans?
Back in the Spring of 2020, the Chancellor introduced a National Insurance Holiday for employers adding former members of the UK armed forces to their payroll.
In other words, for every ex-armed forces employee hired, an employer is exempt from paying ensuing National Insurance Contributions. However, the employee in this relationship still needs to pay their side of the NIC liability.
The holiday was announced as part of the Spring budget.
How does it work?
The relief applies to the first year of a veteran's civilian employment, as long as their salary is under £50,270 per year (or up to £5,000 for the first 12 months of their employment).
What about the claim period?
The relief has been available since April 2021. For each veteran they hire, an employer can claim the relief for up to a 12 month period from the first day of a veteran’s civilian employment.
Important to note
The claim is applied per veteran and not per employment contract.
If a veteran leaves employment after six months, the next employer can claim for the remaining six months of ER NIC relief. That means employers should keep a record of any new veteran’s first day of civilian employment to keep track of how many months they have left to claim for.
Who does it apply to?
Those that can be claimed for include veterans who have served time in the UK armed forces.
A person is a veteran when they have served one or more days in the armed forces. In other words, a veteran must have completed at least one day of basic training in Her Majesty's regular armed forces to qualify for NIC relief.
It’s worth noting the relief only applies to veterans who haven’t previously held a civilian position.
Why do we have Veteran NIC relief?
Veteran NIC relief was brought about as an incentive for employers. The intent is to encourage the recruitment of veterans and, in so doing, support their transition back to civilian life.
Veteran NIC for the 2021-22 tax year
There are two ways to claim NIC relief for the 2021-22 tax year - through your company’s payroll or outside it.
If you decide to claim through your payroll, you’ll need to submit a revised Final Payment Submission (FPS) once the 6th of April 2022 has passed. You’ll need to use the National Insurance category V, which is the letter category for qualifying veterans.
Outside of payroll
If you’re unable to self-serve via payroll reporting, you’ll need to write a letter to HMRC requesting the relief. You can do so after the 6th of April 2022.
HMRC provides guidance on how to do this, including the address for single and multiple claims as well as what information you’ll need to provide.
Veteran NIC relief in 2022 and onwards
From April 2022, payroll software developers are instructed to introduce the new NIC category of V to their systems. Any relief due can then be automatically calculated.
Important to note
Category V isn’t a replacement for NIC categories B, T, C, W, J, or Q.
Employers will also be responsible for:
Checking that the employee is a qualifying veteran
Confirming The first day of the veteran’s civilian employment (and keeping a record of this)
In order to do this, any employer can ask the employee for:
a veteran’s Identification card (which marks their time in the armed forces)
their letter of employment or contract with HM Armed Forces
their 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 if they’re still within their 12-month period)
Automatically assign category ‘V’ to new veterans
As an HMRC-approved software, PayFit is programmed to keep up with all the latest compliance, including any legislative changes.
Our platform will automatically assign a National Insurance letter category of V to any new starter that is a veteran. All you need to do is select “Employee is a veteran”, and PayFit will automatically adjust NICs accordingly.
From NIC relief to pension contributions, benefits and backdated salary changes, our platform takes care of it.
Automatically generate payslips and P11Ds as well as track expenses and leave. We also integrate with some of the UK’s leading HR and accounting software so you can manage your payroll, HR and finance tasks seamlessly.
The information contained in this document is purely informative. It is not a substitute for legal advice from a legal professional.
PayFit does not guarantee the accuracy or completeness of this information and therefore cannot be held liable for any damages arising from your reading or use of this information. Remember to check the date of the last update.