1. What the under-25 NIC relief is
Since April 2016 UK employers have paid 0% Class 1 secondary National Insurance on apprentices under 25, up to a wage cap called the Apprenticeship Upper Secondary Threshold (AUST). The AUST is aligned to the higher-rate income tax threshold — £50,270 for tax year 2025-26.
In normal hires, employer NIC is 13.8% above the secondary threshold. On an apprentice under 25 earning under the AUST, that 13.8% becomes 0%. Real cash off your payroll every month they’re with you.
2. Who qualifies
Three conditions, all must apply:
- The apprentice is following a recognised English apprenticeship standard (or equivalent Welsh, Scottish or NI framework).
- The apprentice is under 25 on the date earnings are paid.
- You hold a written apprenticeship agreement for the duration the relief is claimed.
There is no minimum length of apprenticeship needed for the relief, and no minimum number of hours. If they’re a genuine apprentice under 25, the relief applies from day one.
3. How to claim it — payroll mechanics
There’s no separate application. The relief is delivered through your payroll software using NIC category letter H:
| Category letter | When to use it | Employer NIC |
|---|---|---|
| H | Apprentice under 25 on a recognised standard | 0% up to £50,270 |
| A | Standard adult employee | 13.8% above £9,100 |
| M | Employee under 21 (not an apprentice) | 0% up to £50,270 |
Your payroll provider applies category H, the saving flows through your Real-Time Information (RTI) submission to HMRC, and your employer NIC bill drops automatically. No retrospective claims, no separate form.
4. What it’s worth — worked examples
22-year-old paid £22,000.
- · Pay above the secondary threshold (£9,100): £12,900
- · Standard employer NIC at 13.8%: £1,780/year
- · With category H (apprentice under 25): £0/year
- · Saving over a 14-month apprenticeship: ~£2,225
24-year-old paid £30,000.
- · Pay above the secondary threshold: £20,900
- · Standard employer NIC at 13.8%: £2,884/year
- · With category H: £0/year
- · Saving until 25th birthday (assume 10 months): ~£2,400
- · Continues as a normal employee on category A after that.
Three apprentices, average pay £24,000.
- · Pay above secondary threshold each: £14,900
- · Standard employer NIC per apprentice: £2,056/year
- · With category H: £0 each
- · Annual NIC saving across all three: £6,168
- · Stack this with levy-funded training and the cash cost of running the apprentice team drops to wages-only.
5. How it stacks with the Apprenticeship Levy
These two things are separate — and they stack.
Covers training costs — off-the-job teaching, materials, End-Point Assessment. Either drawn from your levy account (levy payers) or 95%-funded by government (non-levy employers).
Covers wage costs — the employer NIC you would have paid on the apprentice’s salary. Real cash off your monthly payroll bill.
For a typical L3 apprentice under 25, the combined effect is: training paid for, employer NIC waived. You’re only paying salary — and on a junior wage, with rising productivity through the apprenticeship.
6. What changes when the apprentice turns 25
From the day they turn 25, you switch their payroll category from H to A (or the applicable letter), and employer NIC starts being deducted at the usual 13.8% above the secondary threshold.
Two important things to be clear on:
- ·The apprenticeship continues. The training, the funding from the levy, the End-Point Assessment — all unaffected. Only the NIC treatment changes.
- ·The saving stops, it doesn’t reverse. You don’t owe HMRC anything back — the relief applied for the period they were under 25 stays applied.
7. Common mistakes
- 1Leaving the apprentice on category A. The most common error — payroll forgets to switch the letter when the apprenticeship starts and pays full NIC for months. Recoverable through an FPS correction, but easier to get right at the start.
- 2Forgetting to switch on the 25th birthday. The reverse problem. Keep them on category H past their 25th and you’re under-paying HMRC. Set a payroll calendar reminder.
- 3Claiming on a “trainee” who isn’t a real apprentice. Category H needs a recognised apprenticeship standard and a signed agreement. Calling a junior hire an “apprentice” in conversation isn’t enough.
- 4Assuming Employment Allowance is separate. NIC relief on under-25 apprentices runs in addition to the £5,000 Employment Allowance — you can claim both. They don’t collide.