Last week, the government announced in-year reductions to National Insurance rates and the cancellation of the Health and Social Care Levy as a separate tax. The key changes are:
Reductions to National Insurance rates
National Insurance contribution (NIC) rates will be cut by 1.25 percentage points for:
- employees,
- employers, and;
- the self-employed
This effectively reverses the uplift introduced in April 2022 for the rest of the tax year. This cut will take effect from the 6th of November 2022 and will cover:
- Class 1 (both employee and employer)
- Class 1A
- Class 1B, and;
- Class 4 (self-employed) NICs
Social Care Levy
The ring-fenced Health and Social Care Levy of 1.25% due to be introduced from April 2023 will also not now go ahead.
HMRC have previously asked employers and software developers to include a temporary generic message on payslips for the tax year (2022 to 2023) to explain the reason for the NICs uplift.
This message will not be applicable from the 6th of November 2022, and should be removed from payslips with effect from this date.
The full detail on all of these changes will be published by HMRC on GOV.UK in due course, but this information allows you time to make the appropriate changes in order to be ready for November 2022 payroll.
If you use HMRC Basic PAYE tools this software will be automatically updated to take account of these changes.
HMRC have acknowledged that the timeline is tight and some employers may not be able to implement the changes in time. They will be directing employees to their employers to correct any overpaid NICs in the first instance.
HMRC have also written to Payroll Software Developers to make them aware of these changes and asked them to take the relevant actions. You should therefore contact your software developer initially with any queries.
Please note that these changes are subject to Parliamentary approval.
Help with the reductions to National Insurance rates
If you require any further information you can also search ‘Prepare for the Health and Social Care Levy’ on GOV.UK.
Or you can contact me if you need help with the National Insurance changes or any aspect of your Payroll
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