NI for Apprentices & Young Workers

Key facts

Employer NI: 0% up to £50,270/year for apprentices under 25 (category H) and employees under 21 (category M).
Above £50,270, employers pay the standard 15% rate.
Employees still pay normal Class 1 NI at 8% (PT to UEL) and 2% (above UEL).
Armed forces veterans get a NI holiday in their first 12 months of civilian employment (category V).
Freeport employees (category F/I/S/L) benefit from a higher Secondary Threshold of £25,000.

Employer NI Relief for Young Workers

The government provides National Insurance relief to encourage employers to hire young people and apprentices. This relief means employers pay 0% NI on a significant portion of these employees’ earnings, substantially reducing the cost of employment.^[1]

The relief applies through special NI category letters that your payroll software uses to calculate the correct employer NI contribution.

NI Category Letters

Category	Applies To	Employer NI (up to UST)	Employer NI (above UST)	Employee NI
H	Apprentices under 25	0%	15%	Standard (8% / 2%)
M	Employees under 21	0%	15%	Standard (8% / 2%)
V	Veterans (first 12 months civilian employment)	0%	15%	Standard (8% / 2%)
A	Standard employees (for comparison)	15% (above ST £5,000)	15%	Standard (8% / 2%)

The Upper Secondary Threshold (UST) is £50,270 per year (£4,189/month, £967/week) for 2025/26. This is the same figure as the Upper Earnings Limit.^[4]

Apprentices Under 25 (Category H)

To qualify for category H, the employee must meet both of these conditions:^[2]

Be a genuine apprentice on an approved apprenticeship framework or standard
Be under the age of 25

The employer NI saving is significant:

Example — apprentice earning £18,000/year:

Category A (standard): employer NI = 15% × (£18,000 − £5,000) = £1,950
Category H (apprentice): employer NI = 0% up to £50,270 = £0
Annual saving: £1,950

Example — apprentice earning £30,000/year:

Category A (standard): employer NI = 15% × (£30,000 − £5,000) = £3,750
Category H (apprentice): employer NI = 0% up to £50,270 = £0
Annual saving: £3,750

When the Apprentice Turns 25

The employer must change the NI category from H to A (or the appropriate standard category) from the first pay period following the apprentice’s 25th birthday. Standard employer NI rates then apply from that point.

Employees Under 21 (Category M)

All employees under the age of 21 qualify for NI category M, regardless of whether they are an apprentice. This gives the same 0% employer NI rate up to the Upper Secondary Threshold.^[1]

Example — 19-year-old employee earning £22,000/year:

Category A (standard): employer NI = 15% × (£22,000 − £5,000) = £2,550
Category M (under 21): employer NI = 0% up to £50,270 = £0
Annual saving: £2,550

When the Employee Turns 21

The NI category changes from M to A from the first pay period after the employee’s 21st birthday. If the employee is also an apprentice under 25, they move to category H instead.

Armed Forces Veterans (Category V)

Employers hiring armed forces veterans in their first year of civilian employment can use NI category V. This provides the same 0% employer NI up to the Upper Secondary Threshold for the first 12 months.^[3]

Eligibility

The employee must be a former member of the regular armed forces (Army, Royal Navy, Royal Marines, or Royal Air Force)
It must be the veteran’s first civilian employment since leaving the armed forces
The relief lasts for the first 12 consecutive months of that employment
The employer must verify the veteran’s status (discharge papers or other evidence)

How to Claim

Use NI category V on the veteran’s payroll record for the first 12 months. After 12 months, change to the standard category (usually A). If you have already been using category A, you can retrospectively apply category V and reclaim the overpaid employer NI.^[3]

Freeport Employees

Employers operating within designated Freeport or Investment Zone tax sites can benefit from a higher Secondary Threshold of £25,000/year (instead of £5,000) for qualifying new employees. The relevant NI categories are:^[4]

Category	Applies To	0% Rate Up To
F	Standard Freeport employee	£25,000/year
I	Freeport employee, married women’s reduced rate	£25,000/year
S	Freeport employee, over State Pension age	£25,000/year
L	Freeport employee, deferred NI	£25,000/year

Summary of Employer NI Savings

The table below shows the maximum annual employer NI saving for each category compared to a standard category A employee:

Category	0% Rate Up To	Max Annual Employer NI Saving
H (apprentice under 25)	£50,270	£6,791 ^*
M (employee under 21)	£50,270	£6,791 ^*
V (veteran, first 12 months)	£50,270	£6,791 ^*
F (Freeport employee)	£25,000	£3,000 ^*

* Maximum saving calculated as 15% × (£50,270 − £5,000) = £6,790.50, rounded. For Freeport: 15% × (£25,000 − £5,000) = £3,000.

Tip: The employer NI savings from hiring apprentices and young workers are in addition to any Employment Allowance you claim. For example, a small business could claim £10,500 Employment Allowance and also benefit from 0% employer NI on apprentice earnings — the two reliefs are not mutually exclusive.

What the Employee Pays

It is important to note that categories H, M, and V only affect employer NI. The employee still pays the standard Class 1 NI rates:^[1]

8% on earnings between the Primary Threshold (£12,570/year) and the Upper Earnings Limit (£50,270/year)
2% on earnings above the Upper Earnings Limit

The employee’s NI deduction on their payslip will be the same whether they are on category A, H, or M. The saving is entirely on the employer’s side.

Frequently Asked Questions

What is the employer NI rate for apprentices under 25?

Employers pay 0% NI on earnings up to the Upper Secondary Threshold (£50,270/year in 2025/26) for apprentices under 25 on NI category H. Above £50,270, the standard 15% employer rate applies. The apprentice still pays normal employee NI at 8% on earnings between the Primary Threshold and Upper Earnings Limit.

Do employees under 21 get a NI discount?

The discount is for the employer, not the employee. Employers pay 0% NI on earnings up to £50,270 for employees under 21 (category M). The employee still pays the standard 8% rate on earnings above the Primary Threshold. The relief ends on the employee’s 21st birthday.

What is the veterans NI holiday?

Employers hiring armed forces veterans in their first year of civilian employment can use NI category V, which gives 0% employer NI on earnings up to £50,270/year. This applies for the first 12 months of the veteran’s first civilian job after leaving the armed forces.

What NI category letter should I use for a young apprentice?

Use category H for apprentices under 25, and category M for employees under 21 who are not apprentices. If the employee is both under 21 and an apprentice, use category H (as it is specifically for apprentices). The category must be changed when the employee reaches the relevant age threshold.

Sources

National Insurance rates and categories — GOV.UK
Pay for apprentices — GOV.UK
National Insurance for veterans — GOV.UK
Rates and thresholds for employers 2025 to 2026 — GOV.UK