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The Regional Employer NI Holiday

Published Friday, November 1, 2013

In its first Budget in June 2010 the Coalition Government annunced a three year regional National Insurance contributions (NICs) 'holiday' for new employers. New businesses would be entitled to deduct up to £5,000 from their NICs bill, for each of the first ten employees they took on in their first year of business. New businesses in Greater London, the South East Region and the Eastern Region were excluded from the scheme. The NI Holiday lasted from 22 June 2010 to 5 September 2013. This note looks at the scheme's introduction and presents figures on its take-up.

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In its first Budget in June 2010 the Coalition Government announced a three year regional National Insurance contributions (NICs) 'holiday' for new employers. New businesses would be entitled to deduct up to £5,000 from their employer NICs bill, for each of the first ten employees they took on in their first year of business. New businesses in Greater London, the South East Region and the Eastern Region were excluded from the scheme. The NI Holiday lasted from 22 June 2010 to 5 September 2013.

Initially the Government forecast that the NI Holiday would cost £940m in total over its three year lifespan. It was estimated that 400,000 new businesses would benefit from the scheme, and the average benefit per business would be about £2,000. At the time some commentators raised doubts about whether the scheme might be too small financially and too complex administratively to be this successful. Statutory provision for the scheme was made in the National Insurance Contributions Act 2011. During the Bill’s scrutiny, many Members raised the fact that the scheme would be geographically restricted, though the Government opposed extending the scheme on a UK-wide basis, on the grounds that the policy was designed to support new businesses in parts of the country that were most reliant on the public sector. HMRC have published statistics on the take-up of the NI Holiday up to December 2012. Over this period there have been 20,365 successful applications to join the scheme. NI rebates worth around £37m have been paid.

During its operation the Government did not consult on extending the life of the NI Holiday. However, in the 2013 Budget the Chancellor announced a new ‘Employment Allowance’: from April 2014 all businesses and charities would be eligible to reclaim up to £2,000 from their employer NICs bill. The cost of the allowance is projected to be £1.26 billion in 2014/15, rising to £1.73 billion by 2017/18.

Commons Briefing papers SN06737

Author: Antony Seely

Topics: National insurance, Taxation

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