Abolition of Employer National Insurance for Under 21s

In the Autumn Statement 2013 the Government announced plans to make employing younger people more affordable for businesses. From the 2015-16 tax year there secondary (employer) national insurance contributions will be abolished for employees under the age of 21 earning below the Upper Secondary Threshold, currently (2015-16) equal to the Upper Earnings Limit. Employees under 21 will continue to pay the same rate of national insurance as their colleagues over 21.

The below table details the previous and new NI letters for employees under the age of 21.

CategoryNI Letter 21yrs and overNI Letter under 21ys
Not Contracted-Out Standard RateAM
Not Contracted-Out Deferred RateJZ
Not Contracted-Out Standard Rate (Mariners)RY
Not Contracted-Out Deferred Rate (Mariners)QP
Contracted-Out Salary Related Standard Rate *DI
Contracted-Out Salary Related Deferred Rate *LK
Contracted-Out Salary Related Rate (Mariners) *NV

*these categories will end in April 2016 following the introduction of Single-Tier pension

Your payroll software should automatically update the NI letter at the start of the 2015-16 tax year. But please do check as this change will save your company money if you employee individuals under the age of 21.

You will no longer have to pay any employers national insurance on the earnings of employees under the age of 21 up to £815 per week (annual equivalent £42,385). You will save over £500 per annum if for an employee earning £12,000, if the pay was £15,000 this would save you £950 and on earnings of £18,000 you would save over £1,350 in employers national insurance contributions.

For more information see HMRC

 

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