Worker’s July payslips may contain a pleasant surprise, as HMRC have taken the unusual step of changing National Insurance (NI) mid-tax year.
April 2022 saw a 1.25% temporary increase in NI rates. The extra funds generated from the increase are earmarked for the overstretched NHS and equivalent bodies. From April 2023 NI rates will return to their previous levels, but a separate health and social levy will become payable at 1.25% instead. For the majority, this is a cosmetic change. It is important to note that and social levy will be payable by pensioners, who are exempt from NI and so they will feel an impact.
From the 6 July 2022, some National Insurance Contributions (NICs) thresholds will increase. Previously NI was payable on earnings above £9,880, but this has now increased to £12,570, aligning it with the amount an individual can earn tax-free. The primary threshold for 6 July 2022 to 5 April 2023 will rise to:
- £242 per week
- £1,048 per month
- £12,570 per year
Class 1 National Insurance thresholds for 2022 to 2023.
For individuals earning less than £30k, the July 2022 changes will more than compensate for the increased levied in April 2022 and they will have more take-home pay. Someone on £20k a year will benefit by £178. The news is less good for high earners, with those earning £50k or more paying more NI than previously.
Ensure payroll use the correct thresholds
To accommodate this change, payroll software, including HMRC’s Basic PAYE Tools, will need to be updated. This may happen automatically, or you might need to take action.
It is important that payments due to be made on 6 July 2022 or later are calculated using the correct thresholds. Employers who run their payroll early should check that their software has been updated before processing and reporting these payments.
HMRC expect that all software will be updated by 6 July 2022, so any payments processed after that date should not need to be delayed. If you are unsure about whether or not your software has been updated, please contact your software provider.
If you use Basic PAYE Tools, please note that this software will be updated to take account of National Insurance threshold increases from 4 July 2022. HMRC advise you to wait until after 4 July 2022 to run payroll for any payments made on or after 6 July 2022.
Please talk to us about these changes and how we can help you with your payroll.