Late last month, the government announced plans to reverse the increase to National Insurance levels that was implemented earlier this year starting from 6th November 2022. The planned introduction of a separate Health and Social care Levy will also be dropped.
The Health and Social care changes would have seen a 1.25% increase to some types of tax. Though the 1.25% levy has temporarily increased some types of National Insurance, the scheme will now end in November 2022. Employees stop paying NI when they reach State Pension age, but would have had to pay the 1.25% levy from April 2023. This has now been dropped.
| 2022/23 Weekly Threshold | 2022/23 Annual Threshold | 2021/22 Weekly Threshold | 2021/2022 Annual Threshold |
Lower Earnings Limit (LEL): Employees earning less than this limit won’t incur NI, but they also won’t accrue NI benefits such as qualifying payments towards their State Pension. | £123 | £6,396 | £120 | £6,240 |
Primary Threshold: This is the point at which employees start paying NI on any earnings above the threshold. Earning below this, but above the Lower Earnings Limit still doesn’t incur NI, but employees will earn NI ‘credits’, and accrue NI benefits. In 2022/23 the National Insurance Primary Threshold will increase during the tax year. | 6th April 2022 - 5th July 2022 £190 6th July Onwards £241.73 | 6th April 2022 - 5th July 2022 £9,880 6th July Onwards £12,570 | £184 | £9,568 |
Upper Earnings Limit (UEL): Earnings above the Primary Threshold up to (and including) the Upper Earnings Limit incur NI at the following rates: 2021/22: 12% 2022/23 6th April – 5th November: 13.25% 6th November onwards: 12% 2023/24: 12% | £967 | £50,270 | £967 | £50,270 |
Earnings above the Upper Earnings Limit: incur NI at: 2021/22: 2% 2022/23: 6th April – 5th November: 3.25% 6th November onwards: 2% 2023/24: 2% | £968 and above | £50,271 and above | £958 and above | £50, 271 and above |
What the changes mean for Employers
Employers need to deduct employee contributions and pay them to HMRC, alongside your contributions as their employer.
| 2022/23 Weekly Threshold | 2022/23 Weekly Threshold | 2021/22 Weekly Threshold | 2021/2022 Annual Threshold |
Secondary Threshold: On salary payments above this threshold employers pay NICs at a rate of: 2021/22: 13.8% 2022/23: 6th April – 5th November: 15.05% 6th November onwards: 13.8% 2023/24: 13.8% | £175 | £9,100 | £170 | £8,840 |
Employers will still be able to benefit from the Employment Allowance, reducing employer's NI each month you use up the allowance or the tax year starts again.
The allowance is:
£4,000 in 2021/22
£5,000 in 2022/23
State Pension Age
When employees reach state pension age, employers need to update their National Insurance category to C. You will continue to make national insurance contributions for them, but you won't deduct NI from their pay anymore. As of the 23rd September, you will no longer be required to deduct the 1.25% levy from employee wages, which was originally planned to start in April 2023.
What the new levy means for dividend tax?
The governments announcements in the mini-budget means dividend tax rates will return to their previous levels in April 2023