From the 6April 2022, National Insurance Contributions (NICs) will be increasing for both employers and employees as a result of the Health and Social Care (HSC) Levy charge announced at Autumn Budget 2021.
Employer Class 1, Class 1A and Class 1B, employee Class 1 and the self-employed Class 4 NICs will all increase by 1.25 percentage points.
These arrangements apply until 6 April 2023, when the HSC Levy will be treated as separate tax altogether, and NI rates will return to their current levels.
The levy is intended to fund the NHS and the UK’s Health and Social Care system. It will be collected by existing PAYE and Self-Assessment arrangements.
From 2023-24, the levy must be reported on the payroll and clearly shown on payslips as a distinct 1.25 per cent tax change for employees that are required to pay it.
The HSC levy will also be payable by both employees and employers from 6 April 2023, where the employee is over state pension age and earning more than the primary threshold (Class 1).
Whilst there are certain reliefs, such as the Employment Allowance, that may benefit employers in 2022-23, it would still be wise to consider how the increased costs will impact your business going forward. This will be key to navigating the changes successfully.
You may also wish to anticipate queries from your employees by initiating dialogue with them about the changes ahead of the new tax year.
The Government are advising employers to ensure that any payslips issued in the 2022-23 tax year carry a standard message outlining the purpose of the increased contributions, for the benefit of employees.
If you are concerned about the upcoming changes, we would encourage you to seek professional advice.
Our dedicated payroll bureau can support you to ensure your payrolls are processed in line with current legislation, whilst our wider team of tax advisers, Chartered Accountants and business advisers can help you to plan for and understand the tax and cash flow implications of these changes for your business.