Are you aware that the National Insurance thresholds are changing? Are your systems up to date and ready for the changes?
From 6 July 2022, the Primary Threshold (PT) for National Insurance – the threshold at which employees begin paying National Insurance contributions (NICs) – will increase to £12,570.
This will bring the rate in line with the current personal allowance for income tax and means those earning below this amount each year will pay no tax or NICs.
For those employees earning above the PT, it equates to a saving of £356 per annum.
This jump in the PT comes at a time when individuals may be experiencing financial strain as a result of the cost of living crisis and is one of the measures announced by the Chancellor in his Spring Statement aimed at supporting the public.
The public have already faced, at the beginning of the current tax year, an increase in the rates of NICs of 1.25 percentage points – for example, the main employees rate increased from 12% to 13.25%.
The increase in NICs was legislated for to fund spending on health and social care and will be formally replaced by a new Health and Social Care Levy in April 2023.
Do directors enjoy the same threshold?
The PT for Directors whose NICs are calculated on an annual basis will instead be £11,908 for the year. Changes to the NI rules and an increase in dividend tax rates mean that it is important to reassess your strategy for extracting profits from your business, to minimise the tax burden on the business and individuals.
NI thresholds and employers contributions
The Secondary Threshold, the point at which employers must start making contributions, has not been changed and remains at £9,100 for the 2022/23 tax year.
As a result, employers will continue to pay NICs for employees once they earn £9,100 per annum or more, even though the employee does not have to contribute until they earn £12,570 per annum.
Self-employed
The Lower Profits Limit (LPL), the point at which self-employed people start paying Class 4 National Insurance, will also be increased to £12,570 at the same time.
The threshold will also apply to Class 2 NICs. For those whose profits fall between the Small Profits Threshold (SPT) of £6,725 and the LPL of £12,570 they will not be required to pay NICs but will receive a NIC annual credit.
How can GH Payscheme help?
As a dedicated BACS-approved payroll bureau, we can help you to outsource your payroll function and ensure you implement the new rate changes at the correct time.
We can assist with all aspects of your payroll; from calculating statutory payments and helping you to fulfil your auto-enrolment duties, to providing confidential, secure payslips and bespoke departmental reports, we will take care of the ‘behind the scenes’, to enable you to stay in control.
Beyond this, we are also able to call on the wider expertise within George Hay, should you require tax planning advice in respect of the impending changes.
If you are concerned about the changes to NI thresholds and what they mean for your business, wherever you are in the UK, contact us today.
