What is National Insurance contributions relief for veterans?

First introduced in 2021, the National Insurance contributions relief for employers who hire veterans is designed to encourage more businesses to employ veterans of the armed forces.

In this article we’ll explore what the veterans National Insurance contributions relief is, how to qualify for it, and how long it lasts.

What is National Insurance contributions relief for veterans?

In simple terms, the veterans National Insurance contributions relief gives employers the opportunity to reduce the National Insurance contributions they pay when they employ a veteran.

This relief lasts for 12 months from the date when the veteran first began working in civilian employment.

Who qualifies for National Insurance contributions relief for veterans?

The definition of a veteran for HMRC is someone who has either:

• served at least a single day in the regular armed forces
• completed at least a single day of basic training.

Veterans starting their first civilian job and are employed by someone else can access this relief no matter when they left the regular armed forces.

If the veteran is self-employed though, they are not eligible for this particular relief.

The relief applies specifically to the part of a veteran’s earnings that falls below the veteran’s upper secondary threshold.

This means that the employer will not pay any National Insurance Class 1 contributions for the veteran employee until their earnings surpass the Veterans upper secondary threshold.

What is the veteran’s upper secondary threshold?

The employer of a veteran will pay secondary Class 1 National Insurance contributions on all earnings by the employee above the secondary threshold for veterans.

The rate for Class 1 National Insurance contributions is currently set at 13.8% but will rise to 15% in April 2025.

The current Veteran’s upper secondary threshold is: 

• £967 per week
• £4,189 per month
• £50,270 per year.

The threshold will remain the same for the tax year 2025/26.

What employment qualifies for veterans National Insurance contributions relief?

The National Insurance contributions relief for veterans is available for any veterans who work in what’s known as civilian employment. 

Civilian employment refers to work outside of the armed forces, and this can include roles within organisations that may have strong ties to HM Armed Forces, such as the Ministry of Defence or NATO. 

However, in the context of National Insurance contributions relief for veterans, employment with a reserve organisation is not classified as civilian employment and does not contribute toward the qualifying period.

Self-employed individuals are not required to pay Class 1 National Insurance contributions, as these are applicable only to people who work for an employer. 

This means that self-employed individuals do not qualify for Veterans National Insurance contributions relief and cannot claim it for themselves. 

A self-employed person can employ people, and they will need to set up a PAYE scheme and, as such, will be able to apply the veteran’s relief for their qualifying employees. 

It’s important to also note that self-employment activities do not count toward the qualifying period necessary for eligibility.

When does a veteran qualify for National Insurance contributions relief?

The qualifying period kicks off on the first day of a veteran’s first civilian job after leaving the regular armed forces and lasts for 12 months.

Note that this period is set and does not stop if the veteran leaves employment or changes their employer.

If a veteran has more than one job, each employer can claim the relief during the qualifying period for the same employee.

Likewise, if a veteran leaves one job and starts another, the new employer can also claim the relief, but only until the end of the 12-month qualifying period. 

The new employer will need to confirm the date when the veteran first started civilian employment to determine the applicable period.

How can an employer claim the National Insurance contributions relief for veterans?

For employees belonging to category A (most employees working in the UK today), an employer can apply the relief in real time by assigning National Insurance category letter V to their qualifying veteran employees via PAYE.

Where the veteran employee also belongs to a category other than A (such as B which covers married women and widows who have a valid, reduced rate certificate, or C which contains employees over the State Pension age), the employer will need to write to HMRC at the end of the tax year to claim the tax relief.

In the letter to HMRC the employer will need to contain the following:

• the veteran employee’s name
• their date of birth
• their National Insurance number
• the reason the employer is claiming the relief
• you’ll need to state that you can’t make this change via payroll reporting
• the period of time the employer overpaid in
• state that the employer is claiming for a qualifying veteran (you will need retain evidence of this, as HMRC may request it at a later date)
• the sort code, account number, and account name for the bank account the employer would like the relief paid into.

The letter will need to be sent to the following address if claiming for a single veteran employee:

HM Revenue and Customs

National Insurance contributions and Employer office

BX9 1AN.

If the employer is writing about National Insurance contribution relief for multiple veteran employees, they should write to:

HM Revenue and Customs

National Insurance contributions and Employer office

BX9 1BX.

What counts as evidence of membership of the Armed Forces?

To support the application for National Insurance contribution relief for veterans, the employer should ask their employee for evidence of their status as a veteran.

Some pieces of identification that HMRC will accept include:

• discharge papers from the armed forces
• their armed forces identification card (which shows their time in the armed forces)
• a letter of employment or contract with the armed forces
• a P45 from leaving the armed forces.

Employers should keep all evidence for at least four years in case HMRC asks to see it.

You can read more about the veterans National Insurance contributions relief on the HMRC website.