It was on 7 September 2021 that we first heard about a new 1.25% Health and Social Care Levy, imposed on employers, employees and the self-employed, coming in from 2023/24. Further, this was to be effectively accelerated into 2022/23 by a 1.25 percentage point rise in National Insurance contributions (NICs). As expected, and despite changes to thresholds earlier this year, the increased NIC rates have resulted in a reduction in take home pay for many individuals.
The Health and Social Care Levy has now been abolished and will not come in next April. Further, the Government is removing the associated 1.25 percentage point increase in NICs from 6 November 2022.
Employers will need to make sure that they update their payroll software in time for this third change in NIC rates and bandings in 2022/23!
In the case of NIC rates which apply annually, transitional rates will apply to deal with the mid tax-year change. In particular,
- Class 1 employee NIC rates that apply annually (including for company directors) will be set at a main rate of 12.73% and an additional rate of 2.73% for 2022/23.
- Class 1A NICs on taxable and expenses (if not paid monthly through the payroll) will be set at 14.53% for 2022/23. The same applies to Class 1B NICs for PAYE Settlement Agreements.
- Class 4 NICs paid by self-employed individuals will be set at a main rate of 9.73% and an additional rate of 2.73% for 2022/23.