The Government has decided to reverse the 1.25 percentage point increases in national insurance contribution (NIC) rates which were introduced from 6 April 2022.
The rates of Class 1 NIC are taken back to the levels that were in place on 5 April 2022 but only with effect for pay periods beginning on and after 6 November 2022. The NIC thresholds which were increased from 6 July 2022 are not being reversed. The new rates will be:
Employees’ Class 1 NIC
- 12% (was 13.25%) on earnings in the band: £1,048 to £4,189 per month (£12,570 to £50,270 per year)
- 2% (was 3.25%) on earnings above £4,189 per month (£50,270 per year)
Employers’ Class 1 NIC
- 13.8% (was 15.05%) on earnings above £758 per month (£9,100 per year).
This will be the third change in NIC rates or thresholds in this tax year but the Government is confident that software developers will be able to amend their payroll programs in time for the November payroll run.
Where NIC is calculated over the full tax year, for example on benefits or for a director who has an annual pay period, the rates for the year are blended. Directors will pay Class 1 NIC at 12.73% on earnings between £11,908 and £50,270 with 2.73% applying to earnings over £50,270. The director’s employer will pay Class 1 NIC at 14.53%.
The self-employed pay Class 4 NIC, calculated as a percentage of their annual profits, with the final payment of income tax due for the year. The new rates of Class 4 NIC for 2022-23 will be:
- 9.73% on profits between £12,570 and £50,270
- 2.73% on profits above £50,270.
Some people may benefit from changing their planned remuneration strategies, especially in relation to timing of payments. We can help you determine the most efficient way for you to be paid or extract profits.
The ring-fenced Health and Social Care Levy of 1.25% due to be introduced from April 2023 will also not go ahead.