6 September 2010 Last updated at 09:59 ET

National Insurance holiday for UK firms kicks in

Firms may be entitled to hang onto more of their takings under the scheme

A scheme offering up to 400,000 new firms a chance to trim their tax bill has come into effect.

Businesses established outside of London, the South East and East of England are eligible for a "holiday" in paying staff National Insurance Contributions (NICs).

Firms can save up to £5,000 for up to the first ten employees hired in their first year of operation.

The scheme, aimed at boosting job creation, is to run for three years.

The government, which unveilled details of the scheme in the June budget, estimates that 400,000 new businesses could benefit - potentially cutting their national insurance payments by up to £50,000 each.

"We need to rebalance our economy which has become over-reliant on public spending and jobs provided by the public sector," said Exchequer Secretary to the Treasury David Gauke.

"The NICs holiday for new businesses, in addition to cuts in corporation tax, will provide a valuable boost to start-up businesses and help foster the private sector-led recovery that will drive growth in the UK over the coming years."