National insurance is increasing by 1.25% from 6th April 2022 to 5th April 2023. How much will this cost? Who is affected? What does an employer need to do? What is the impact on your business?
What are the changes?
In response to the COVID19 pandemic the chancellor announced a temporary increase to National Insurance to fund the NHS Health and Social Care.
The temporary increase is 1.25% therefore the rates from 6th April 2022 to 5th April 2023 will be:
| Tax Band | Tax Rates |
| Employers NIC | 15.05% |
| Employees NIC | 13.25% (Earnings between £9,880 and £50,270) 3.25% (Earnings over £50,270) |
| Self Employed Class 4 NIC | 10.25% / 3.25% |
| Self Employed Class 2 | £3.25 per week remains the same |
Who is affected by the changes?
The changes affect Employees, Employers and the Self-Employed.
Is the increase temporary?
The increase to National insurance is temporary however it will be replaced by a 1.25% health and social care levy, so the increase is set to be permanent but under a separate tax.
How much will this cost me?
It depends on individual earnings and the amount of employees an employer has on the payroll.
An employer with 10 employees earning £35,000 per annum the increase will be £3,140.00.
An employee or a Self Employed individual earning £35,000 the additional NI will be £314 per annum.
What should an employer be doing?
Firstly, these increases need to factor into any forecast from April 2022 onwards to understand the affect this will have on profitability and cashflow.
There are some tax planning opportunities such as a salary sacrifice pension scheme or putting any pay rise into additional employer pension contributions (subject to any HR implications), these are complex areas of tax planning and specialist advice should always be taken in these circumstances. If your accountant can’t help with any of these matters, then talk to us.
I am over state pensionable age will this affect me.
The temporary increase in NI won’t affect you but the Health and Social Care Levy will when it comes into force in April 2023.
Contact us, today for more advice.
