National Insurance Relief for Veterans

If you employ someone who has recently left the armed forces in their first civilian job, you may be able to claim relief from employer National Insurance contributions for their first year of employment. This relief can provide significant savings, but you need to understand who qualifies and how to claim it correctly.

What is the veterans National Insurance relief?

Since April 2021, employers can pay a zero rate of employer's Class 1 National Insurance contributions on the earnings of qualifying veterans. This relief lasts for 12 months from the veteran's first day of civilian employment after leaving the armed forces.

The relief applies to earnings up to the Veterans upper secondary threshold. You pay no employer's National Insurance on earnings below this threshold during the qualifying period, though you still pay the standard rate on any earnings above it.

Who qualifies as a veteran?

An employee qualifies for this relief if they have either:

• Served at least one day in the regular armed forces
• Completed at least one day of basic training

The relief is available when a veteran starts their first civilian job, regardless of how long ago they left the armed forces. This means someone who left the military years ago but is only now taking up civilian employment can still qualify.

How long does the relief last?

The qualifying period begins on the first day of the veteran's first civilian employment since leaving the armed forces and ends exactly 12 months later.

This 12-month period is fixed and does not reset or pause if:

• The veteran changes jobs
• Their employment ends and they start a new job

If a veteran changes employer during the 12-month period, the new employer can continue to claim the relief for the remainder of that period. However, you'll need to find out when the veteran first started civilian employment to calculate how much of the qualifying period remains.

Can multiple employers claim at the same time?

Yes. If a veteran works multiple jobs simultaneously during their qualifying period, each employer can claim the relief on the earnings they pay.

How to claim the relief from April 2022 onwards

From 6 April 2022 onwards, you apply the relief in real time through your payroll software. Use National Insurance category letter V for qualifying veteran employees when submitting your Full Payment Submission (FPS) to HMRC.

Your payroll software will automatically calculate the zero rate of employer's National Insurance contributions for earnings up to the Veterans upper secondary threshold.

How to claim for the 2021 to 2022 tax year

For the period from April 2021 to April 2022, you needed to pay employer's National Insurance contributions as normal, then claim them back from 6 April 2022 onwards.

To reclaim these contributions through your payroll software, submit a revised Full Payment Submission using National Insurance category letter V for the qualifying veteran employee.

If you cannot make the claim through payroll software, write to HMRC with the heading 'Overpaid National Insurance contributions'. Include:

• Your employee's name, date of birth and National Insurance number
• Why you are reclaiming the relief
• The period you overpaid in
• Confirmation that you are claiming for a qualifying veteran and hold evidence
• The account number, sort code and account name for where you want the refund paid

Claims for other National Insurance categories

The category letter V only applies to employees who would normally use category letter A. If your veteran employee falls into a different category (such as B, T, C, W, J, or Q), you must continue using the standard category letter throughout the tax year.

You can then claim the relief at the end of the tax year by writing to HMRC. Your letter should include:

• Your employee's name, date of birth and National Insurance number
• Why you are reclaiming the relief (for example, because the employee is over state pension age)
• Confirmation that you cannot amend through payroll reporting
• The period you overpaid in
• Confirmation that you are claiming for a qualifying veteran and hold evidence
• Your bank account details for the refund

Where to send written claims

For claims covering one employee, send your letter to:

HM Revenue and Customs

National Insurance Contributions and Employer Office

BX9 1AN

For claims covering more than one employee, send to:

HM Revenue and Customs

National Insurance Contributions and Employer Office

BX9 1BX

What records must you keep?

You must keep records proving:

• That the employee is a qualifying veteran
• The start date of the veteran's first civilian employment

You can request the following documents from the veteran:

• Discharge papers from HM Armed Forces
• Employment contract from their previous employment
• Identification card showing their time in the armed forces
• Letter of employment or contract with HM Armed Forces
• P45 from leaving HM Armed Forces

Keep these records for at least 4 years. HMRC may ask to see them at a later date to verify the claim.

Sources

• Claim National Insurance contributions relief for veterans as an employer

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