National Insurance Relief in Freeports and Investment Zones

If your business operates in a UK Freeport or Investment Zone special tax site, you may qualify for valuable National Insurance relief on eligible employees. This relief can significantly reduce your employer National Insurance contributions bill — potentially to zero for employees earning under £25,000 per year. Here's what you need to know about eligibility, qualifying conditions, and how to claim.

What are Freeport and Investment Zone special tax sites?

A special tax site is a designated area of land where businesses can claim certain tax reliefs to encourage economic growth and job creation. These sites exist within UK Freeports (including Green Freeports in Scotland), Welsh Freeports, and Investment Zones across England, Scotland, and Wales.

Before you can claim, your chosen site must be officially designated. You can check the current list of designated Freeport special tax sites and Investment Zone special tax sites on GOV.UK.

Who can claim this relief?

To claim National Insurance relief, you must have business premises located within a designated special tax site. Public authorities cannot claim this relief.

Qualifying employees

Not all employees will qualify for the relief. To be eligible, each employee must meet all of the following conditions:

Time spent on site: The employee must spend at least 60% of their working time in the designated special tax site. This is assessed from the start of employment based on what you reasonably expect their working pattern to be.

Start date: The employee must have started their employment between 6 April 2022 and before:

• 30 September 2031 for English Freeport special tax sites
• 30 September 2034 for Scottish Green Freeport, Welsh Freeport and Investment Zone special tax sites

New employee status: The employee must not have been employed by you or a connected employer in the previous 24 months before their start date.

Within first 36 months: The relief only applies during the first 36 months of the employee's employment with you.

Special circumstances for the 60% rule

If an employee has a protected characteristic of disability, pregnancy or maternity, and you've adjusted the time they spend at the special tax site to accommodate this, the 60% rule is still treated as being met — provided they would usually spend 60% of their time there.

When working arrangements change

You must reassess whether the qualifying conditions are still met if an employee's working arrangements change substantially. If you no longer expect them to spend at least 60% of their working time in the special tax site, you must stop claiming relief from that point forward.

How much relief you can claim

The relief changes how much employer National Insurance you pay through a special upper threshold called the Freeport and Investment Zone Upper Secondary Threshold.

You'll only need to pay Secondary Class 1 National Insurance contributions if your employee earns more than:

• £25,000 per year
• £2,083 per month
• £481 per week

What this means in practice: If an eligible employee earns less than these thresholds, you pay no employer National Insurance contributions at all for that employee. If they earn more, you only pay contributions on the amount above the threshold.

For example, if you employ someone earning £2,000 per month (£24,000 per year) who meets all the qualifying conditions, you pay zero employer National Insurance. If they earn £3,000 per month (£36,000 per year), you only pay employer National Insurance on the £917 above the monthly threshold of £2,083.

How long the relief lasts

You can claim this relief for up to 36 months from the start of each qualifying employee's employment, provided they continue to meet the qualifying conditions throughout that period.

How to claim the relief

Claiming the relief involves two key steps when you run your payroll:

1. Use the correct National Insurance category letter

You must apply a special National Insurance category letter when processing payroll for eligible employees.

For Freeport special tax sites:

• F – standard employees
• I – married women and widows entitled to pay reduced National Insurance
• S – employees over State Pension age
• L – employees who can defer National Insurance

For Investment Zone special tax sites:

• N – standard employees
• E – married women and widows entitled to pay reduced National Insurance
• K – employees over State Pension age
• D – employees who can defer National Insurance

2. Include the workplace postcode

You must provide the qualifying employee's workplace postcode in your Real Time Information (RTI) Full Payment Submission (FPS). This must be a UK postcode within the special tax site.

If your employee spends their 60% across multiple locations within the same special tax site, use the postcode of the location they work in most frequently. If you're dealing with a location without a postcode assigned by Royal Mail, contact the HMRC Employer Helpline for guidance.

Even if an employee stops working in the special tax site partway through the tax year, you must continue to include their special tax site workplace postcode on the FPS for the entire tax year.

Record keeping

You must keep evidence showing that the qualifying conditions are met for each employee you claim relief for. This includes documentation of any exceptions you've applied, such as adjustments for pregnancy or disability.

Sources

• Check if you can claim National Insurance relief in UK Freeport or Investment Zone special tax sites
• Maps of Freeports and Freeport tax sites
• Maps of Investment Zones and Investment Zone tax sites
• Running payroll
• HMRC Employer Helpline

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.