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In a bid to drive the economy and increase growth, the UK government has invested in freeports. These are shipping ports and airports around the country designed to increase job opportunities, trading and investment. Places like the Solent and Teeside are just two of 10 freeport sites across England, Scotland and Wales.
As well as being exempt from paying tariffs, freeports also have different rules when it comes to employers paying National Insurance. As it stands, employers operating within a freeport only need to pay Secondary Class 1 National Insurance contributions if their employee earns more than the stated Freeport Upper Secondary Threshold.
Our guide explains everything you need to know about operating a business with employees in a freeport, how to determine when you’ll need to pay Class 1 NICs and how to keep your payroll in check.
Similar to the secondary threshold for tax purposes, the Freeport Upper Secondary Threshold dictates when an employer should pay Class 1 National Insurance Contributions. The threshold is based on an employee’s salary. It’s also worth noting that this exemption is only applicable for businesses operating from premises inside a freeport tax site.
For employers, National Insurance must be paid for each employee that earns more than:
If an employee does not meet these criteria, the employer doesn’t owe anything in National Insurance contributions.
There are also some additional considerations employers will need to note. As a result, all employees will need to:
A freeport is an area that has one goal: to create economic activity. This can be through trading, investments and job opportunities happening in or near airports and shipping ports. To do this, freeports are also exempt from paying any tariffs to the government.
Each freeport area could see private and public investment in the billions, with both freeports in Wales set to attract £4.9 billion between them by 2030. The Solent Freeport should also generate around £1.35 billion in private-sector investments alone and, due to its existing trading links, is forecast to increase the country’s Gross Value Added (GVA) by an additional £1.75 billion.
A green freeport is the Scottish equivalent of a freeport. Places like Inverness and Forth have been selected as Scotland’s first Green Freeport zones, offering enhanced trading opportunities for both areas. According to the government, Green Freeports have four objectives:
Additionally, these zones will cover surrounding areas. For example, Forth Greenport will span from Fife to Falkirk and West Lothian to the City of Edinburgh. In total, its boundary width equates to 44.8km. The aim is to drive additional traffic, revenue and opportunities to the areas.
As of 2021, the UK announced eight freeport sites to be evenly spread across the country. Since then, Wales and Scotland have confirmed an additional two sites each, designed to bring thousands of job opportunities to the local area. There are currently no known sites for Northern Ireland, but this could change in due course.
· East Midlands Freeport (including the Airport)
· Freeport East (Felixstowe and Harwich)
· Humber Freeport (Humber Estuary)
· Liverpool City Region Freeport
· Plymouth and South Devon Freeport
· Solent Freeport
· Teeside Freeport
· Thames Freeport
· Celtic Freeport (Milford Haven and Port Talbot)
· Anglesey Freeport
· Forth Green Freeport
· Inverness and Cromarty Firth Freeport
· Freeport sites have not yet been announced for Northern Ireland.
Every industry can benefit from the tax relief opportunities that freeports and green freeports offer. Pre-existing businesses might find operating within a freeport zone a more viable option, especially with tax relief available. This is a perk that companies operating outside freeports don’t receive. Businesses that choose to move certain parts of their operations to a freeport can benefit from:
The only real restrictions apply if a business must be situated outside a freeport zone and is unable to move into one. These will be businesses with permanent fixtures, such as countryside estates or independent hotels.
Freeports are designed to work in a business’s favour. As well as driving lots of opportunity for the economy, from talent to investment, they’ve also been created to nurture many businesses. There are lots of incentives for businesses who want to operate within a freeport zone, one being short-term tax relief until 30th September 2026.
All forms of tax relief come with their own set of qualifying criteria and will be available at selected freeport sites. For example, Stamp Duty Land Tax (SDLT) relief is available in England, whilst Scotland and Wales have their forms of transaction tax relief. As a rule, you won’t be able to claim any tax relief after 30th September 2026.
Exclusively for companies investing in qualifying plant or machinery assets and operating within a freeport, businesses can claim 100% on expenditure during their first year. Essentially, this means any costs incurred from the plant or machinery assets will be able to claim it back in full if it qualifies.
Qualifying criteria includes:
As an employer operating in a freeport, you’ll only need to pay National Insurance contributions on any members of staff that earn over £25,000 a year, £2,083 per month or £481 each week. You’ll be able to claim this tax relief until the 30th of September 2026 or for all new employees if they meet the qualifying conditions. If they do, you’ll be able to claim up to 36 months of relief from the start of their contract.
You’ll need to apply the relevant National Insurance contributions category letter when you run your payroll to access this relief. You’ll also need to evidence any qualifying conditions have been met. These include:
|Category letter||Employee Group|
|I||Widows or married women entitled to reduced National Insurance contributions|
|S||Employees still working that are over their state pension age|
|L||Employees eligible to defer National Insurance contributions|
If you’re planning to purchase property or land within an English freeport zone, you may be entitled to claim relief on SDLT. This land will need to be used in a way that qualifies for tax relief, such as:
As a rule, if you can demonstrate that at least 90% of the purchase price is for qualifying land or buildings, you should be able to claim in full from SDLT. In the instance it is less than 90%, you’ll be able to claim relief on the portion of SDLT for the building and land that qualify. If it’s less than 10%, you won’t be able to claim.
If you operate within a freeport, you might be entitled to capital allowances on any qualifying building or structures. Like the other tax relief options, you’ll need to ensure you meet the qualifying criteria:
In the circumstance you incur qualifying expenditure, you’ll be able to claim up to 10% if you meet all the conditions.
If you’re an employer operating within a freeport, there are a few takeaways for you to consider. These will help you approach any applications for tax reliefs, from stamp duty to National Insurance. You’ll need to remember:
At Staffology, our software runs your payroll, whether that’s for five or 1,000 employees. What’s more, we offer compliance with freeport sites, meaning you can keep on top of your National Insurance contributions.