HMRC encouraging business owners to explain NIC increases amid threshold changes and latest announcements
29th March 2022
HMRC encouraging business owners to explain NIC increases amid threshold changes and latest announcements
From 6th April 2022 National Insurance contributions will increase by 1.25%, the estimated £11bn income from which will go to increased funding for the NHS, Health & Social Care.
The increase impacts both employer and employee contributions. View more details on our previous National Insurance Increase article. In real terms, employers will see NICs move from 12% to 13.25%, while employer contributions will move from 13.8% to 15.05%.
HMRC has contacted businesses to ask them to explain the increase in contributions to employees as a “1.25% uplift in NICs to fund NHS, Health & Social care”. Although this messaging is not mandatory for employers HMRC feels that it is important to help employees understand that the increase is to go towards the funding of public services. Payroll software providers have also been asked to include this messaging in their systems.
From April 2023 this levy will be formally separated from NICs and will also apply to the earnings of those working above state pension age.
Increase in NIC Thresholds
In the more recent spring statement, Chancellor Rishi Sunak announced an increase in the thresholds for National Insurance Contributions. From July, NIC thresholds will match those of the Income Tax threshold. Currently set at £12,570 for the financial year, workers will not pay any National Insurance or Income Tax below this threshold. It is estimated that this will save the average worker some £330 in annual NICs.
Employement Allowance Changes
Also announced in the same statement by the Chancellor, the maximum Employment Allowance is set to increase by £1,000 from £4,000 to £5,000 from 6th April 2022. This will allow more businesses, charities and community sports clubs to claim increased reductions on secondary Class 1 NICs.
From 2023 – 2024 tax year onwards, they will also be able to claim a greater reduction on the new Health & Social care levy.
It is estimated an additional 495,000 businesses will benefit from the measures, with a projected 50,000 businesses to be removed completely from paying.
Employment allowance is applicable to any business, charity or community amateur sports club with Employer’s Class 1 NICs liabilities of less than £100,000 for the previous financial year. Care and support workers are also eligible for Employment Allowance.
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