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HMRC internal manual

Employment Income Manual

Employment income: New Deal: option 1: subsidised work with an employer

New Deal was phased out on a rolling programme ending in September 2011. This guidance will be retained until all potential New Deal recipients are out of the in date tax years.

For New Deal participants working in a subsidised job with an employer the Employment Service pay a subsidy to the employer. The employer must pay the participant a wage at least equivalent to the subsidy.

The employer must deduct income tax under PAYE and National Insurance contributions (NICs) from these wages. In 1997/98 and 1998/99 special treatment applied for income tax (see SE01656).

The amount of the subsidy paid to the employer depends on the age of the participant and the hours worked. For instance, in 1998/99 for a participant aged 18 to 24 working 30 hours or more the employer received £60 per week. The payment for a participant aged 25 or over, working the same number of hours, was £75.

Self employment

New Deal payments made to self employed participants (except those made under the New Deal 50 plus scheme (see EIM01660)) are part of any trading profits that they make and are chargeable to income tax and Class 4 NICs. However there is no liability to Class 2 NICs for their period of participation in the New Deal.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)