This 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. These changes have been made to ensure further support for business and individuals and to allow payroll software providers time to take the necessary actions. The key changes are:
- 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 it will cover Class 1 (both employee and employer), Class 1A, Class 1B, and Class 4 (self-employed) NICs
- the ring-fenced Health and Social Care Levy of 1.25% due to be introduced from April 2023 will also not go ahead but the government have committed to match the original extra funding
HMRC had 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 6 November 2022, and it should be removed from payslips with effect from this date.
This therefore could affect small business’s who may now be eligible to the Employment allowance due to the reduction and also Director NI calculations.
Directors are calculated over an annual period of calculation. As such a new adjusted rate will need to be confirmed for the 2022/23 tax year.
