UK Launches National Insurance Holiday

by Amanda Banks, Tax-News.com, London

08 September 2010

The UK government has begun offering new businesses, based in certain regions of the UK, National Insurance Contributions (NICs) holidays, as announced in the coalition government's budget in June.

Under the coalition government’s initiative, new businesses set up outside London, the South East and East of England will be eligible for a NIC holiday worth up to GBP5,000 for up to the first ten employees they hire in their first year of business. This means a maximum saving on their national insurance payments of up to GBP50,000 for eligible entities.

The scheme is to run for three years, and is expected to benefit around 400,000 new businesses. New businesses established since the announcement in the budget on the June 22, and which meet the qualifying criteria, will also be eligible to apply, the government has confirmed.

The regional NICs holiday is designed to encourage the creation of private sector jobs in regions which are more reliant on public sector employment by reducing the cost to new business of employing staff. The unemployment rate in the UK has increased by 2.5% over the last two years. In the second quarter of 2010 employment began to recover, increasing 0.3% or by 184,000 jobs. At June 2010 the UK unemployment rate was 7.8%.

Exchequer Secretary to the Treasury, David Gauke, said of the measures:

“We need to rebalance our economy which has become over reliant on public spending and jobs provided by the public sector.”

“The NICs holiday for new businesses in addition to cuts in corporation tax will provide a valuable boost to start-up businesses and help foster the private sector-led recovery that will drive growth in the UK over the coming years.”

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