Employers finally have clarity on National Insurance treatment for the Post Office Capture Redress Scheme. New regulations confirm that compensation paid by the Department for Business and Trade (DBT) under the scheme will be ignored when calculating Class 1 NICs. The same NIC disregard applies to payments passed on by employers to affected individuals. The instrument was made on 28 October 2025, laid on 29 October 2025, and takes effect from 20 November 2025.

The Capture system pre‑dated Horizon and was used in the 1990s. Government announced the Capture Redress Scheme on 19 June 2025, framing it as a dedicated route for postmasters who suffered shortfalls due to that software. DBT’s announcement also noted that more than £1bn had already been paid across wider Post Office redress.

Crucially for payroll, the NIC disregard covers payments made directly by DBT to eligible people and to a “nominated individual” where a dissolved company or partnership would otherwise have qualified. In practice, that means former shareholders, directors or partners of now‑defunct entities can receive compensation without triggering Class 1 primary or secondary NICs.

The rules also cover “relevant onward payments” - sums an employer pays to a current or former director or employee in order to pass on some or all of a compensation award the company received. The term aligns with the definition used elsewhere in the Social Security (Contributions) Regulations 2001 for Post Office compensation schemes. Payroll teams should recognise this construct from earlier Horizon‑related changes.

What should HR and finance teams do? If you intend to route compensation through payroll for visibility, create or use a pay code flagged as non‑taxable and non‑NICable and exclude it from pensionable pay. If you pay outside payroll via accounts payable, retain clear evidence tying the payment to the Capture scheme so auditors can see why no Class 1 NICs were assessed. Either way, keep award letters and DBT correspondence on file to support RTI notes and any later HMRC queries.

Keep the tax point in view. The NIC change lands on 20 November 2025. Payments made before that date were subject to the rules in force at the time, and any correction route (if needed) will depend on forthcoming HMRC guidance. Separately, ministers have said they will legislate to formalise wider tax exemptions for Capture redress - including Income Tax, Corporation Tax, Capital Gains Tax and Inheritance Tax - so finance teams should watch for those measures before finalising any personal tax positions.

Directors are covered too. Because directors use an annual earnings period for NICs, compensation that is disregarded does not count towards that annual calculation. Former directors and employees receiving onward payments are in scope provided the payment genuinely passes on all or part of the company’s compensation and is documented as such.

Large employers will want to consider the Apprenticeship Levy angle. The levy is calculated on earnings liable to Class 1 secondary NICs; amounts that are not liable should not add to the pay bill used for the levy. That means Capture compensation within this NIC disregard should not inflate levy charges, assuming your coding is correct in payroll.

Operationally, DBT has opened supporting processes to help claimants evidence eligibility. Guidance published on 29 October 2025 explains how to request historic HMRC tax records for Capture claims - useful for HR teams assisting current or former staff with paperwork. Keep those timelines in mind when scheduling any onward payments.