Can a Company Reclaim National Insurance on Apprentices

How National Insurance works for apprentices

Apprentices are treated as employees for tax and National Insurance purposes. This means that both the apprentice and the employer normally pay NI contributions once the apprentice’s earnings pass the standard thresholds.

For the 2025 26 tax year, the thresholds are:

Employees start paying Class 1 NI on earnings above £12,570 per year

Employers start paying secondary Class 1 NI on earnings above £9,100 per year

However, there is a key exemption that helps employers save on NI when hiring younger apprentices.

Employer National Insurance relief for apprentices under 25

Employers do not have to pay Class 1 secondary National Insurance contributions on apprentices under the age of 25, provided their earnings are below the upper secondary threshold.

For the 2025 26 tax year, the upper secondary threshold is £50,270 per year.

This means that for qualifying apprentices, employers pay 0% employer NI on earnings up to that amount. The apprentice still pays their own employee NI contributions as usual once their pay exceeds £12,570.

This relief can save employers around 13.8% of salary costs for each eligible apprentice, making it one of the most valuable financial incentives for apprenticeship schemes.

What conditions must be met for the NI exemption

To qualify for the under-25 NI relief, the following conditions must apply:

The apprentice must be under 25 years old.

They must be employed on a government-recognised apprenticeship framework or standard.

The employer must hold evidence confirming the apprentice’s training agreement and eligibility.

If the apprentice turns 25 during their training, the exemption stops at the start of the next pay period after their birthday. From that point, standard employer NI applies.

The relief only affects the employer’s contributions, not the apprentice’s.

How employers apply the relief

There is no need to reclaim National Insurance through HMRC because the relief is applied automatically through payroll. Employers simply need to use the correct NI category letter when processing the apprentice’s pay.

For eligible apprentices under 25, employers should use category letter H instead of the standard A.

This tells HMRC that the employee is an apprentice who qualifies for the NI exemption. Payroll software will then calculate zero employer NI up to the threshold automatically.

If the wrong code is used, the employer may overpay NI unnecessarily, so it’s important to ensure payroll records are accurate.

Can companies reclaim overpaid National Insurance

If an employer has accidentally paid NI on an apprentice who should have qualified for relief, it may be possible to reclaim the overpaid contributions from HMRC.

To do this, employers must:

Correct the apprentice’s NI category in payroll records.

Recalculate NI for the affected periods.

Submit an amended Full Payment Submission (FPS) through payroll software.

If the overpayment spans multiple tax years, contact HMRC’s Employer Helpline to request a refund.

HMRC will usually offset the refund against future PAYE payments or provide a direct repayment, depending on the situation.

How this differs from other NI reliefs

The apprentice under-25 relief is one of several National Insurance incentives available to employers. Others include:

Under 21 relief: No employer NI on workers under 21 earning below the upper secondary threshold.

Veterans NI relief: Employers pay no NI for the first 12 months of employing an armed forces veteran.

Freeport and Investment Zone reliefs: Zero employer NI for qualifying employees in designated areas.

These schemes can be used alongside the Employment Allowance, which gives small employers up to £5,000 off their total annual NI bill. However, each relief applies under different conditions, so employers should ensure eligibility before claiming.

NI relief and the Apprenticeship Levy

Some employers confuse the NI relief with the Apprenticeship Levy. These are separate systems.

The NI relief reduces the employer’s direct National Insurance contributions for qualifying apprentices.

The Apprenticeship Levy is a charge of 0.5% on annual payrolls over £3 million, used to fund training.

Even if an employer pays the Apprenticeship Levy, they can still claim NI relief for apprentices under 25. The two systems operate independently.

Why NI relief matters for business

Employer National Insurance is one of the biggest employment costs in the UK. Saving 13.8% per qualifying apprentice can add up to thousands of pounds per year, especially for companies running large training programmes.

For example, an apprentice earning £25,000 would normally attract about £3,450 in employer NI each year. With the under-25 exemption, that cost drops to zero, freeing up funds that can be reinvested into training, recruitment, or equipment.

These savings make apprenticeships more appealing for both small businesses and large employers. They also help offset the time and resources needed to train new staff.

Practical steps for employers

To make sure your business benefits fully from the NI exemption:

Confirm the apprentice’s age and eligibility at the start of employment.

Keep signed copies of the apprenticeship agreement and framework details.

Set the correct NI category (H) in payroll software.

Review payroll reports each month to ensure the relief is being applied correctly.

Correct any errors as soon as they are spotted to avoid overpayment.

If your payroll provider manages this process, ask them to confirm how apprentice NI relief is handled.

Other financial incentives for hiring apprentices

In addition to NI savings, employers may also qualify for:

Government funding for apprenticeship training through approved training providers.

Incentive payments for hiring younger apprentices or those with specific learning needs.

Reduced recruitment costs as apprentices often progress into full-time roles, improving staff retention.

Combining NI relief with these incentives can make apprenticeships a highly cost-effective way to grow your workforce.

Final thoughts

While companies cannot technically “reclaim” National Insurance on apprentices, they can avoid paying it altogether by using the under-25 NI exemption correctly. This relief continues to provide meaningful savings for employers across the UK.

As long as apprentices are under 25 and enrolled in an approved training programme, employers can enjoy zero employer NI on earnings up to £50,270. When managed correctly, this is one of the most effective ways to cut employment costs while supporting skill development and long-term business growth.