NIM01505 - Class 1 Structural Overview: zero-rate of secondary NICs for Freeport and Investment Zone special tax site employees: background

Section 1 to 4 of the National Insurance Contributions Act (NICA) 2022

The National Insurance Contributions Act 2022 provides for a zero-rate of secondary Class 1 NICs for Freeport and Investment Zone special tax site employers. The zero-rate of secondary NICs applies only in respect of qualifying employees for a maximum period of 36 months.  The definition of a qualifying Freeport and Investment Zone special tax site employer and employee can be found at NIM01510 and NIM01515.

The zero-rate applies to earnings between the Secondary Threshold (ST) and the Freeport Upper Secondary Threshold (FUST) or Investment Zone Upper Secondary Threshold (IZUST). See NIM01535 for further information about the FUST and IZUST.

Specific category letters (see NIM01540) have been introduced to correctly assess secondary Class 1 NICs for Freeport and Investment Zone special tax site employees. Primary Class 1 NICs will remain unchanged.

Where the zero-rate of secondary Class 1 NICs applies the employer will remain a secondary contributor even if earnings are below the FUST or IZUST. This means they will continue to be required to meet all secondary contributor obligations, including paying the apprenticeship levy and any statutory payments due (if they are the liable employer).

Where we refer to a ‘Freeport’ within this manual, this also applies to ‘Green Freeports in Scotland’ unless otherwise stated.