National Insurance threshold increases from 6.7.2022

The National Insurance threshold increased from 6.7.2022.

The threshold has risen by almost £3k to £12,570 (in line with the tax-free personal allowance).

The above changes were announced, by Rishi Sunak (remember him?), during the Spring Statement.

Employees throughout the UK will notice a change in their pay packets this month as they’ll get to keep more of what they earn!

What does this mean to your employees?

Simply put – your employees will get to keep more of what they earn as they’ll have less national insurance deducted from their pay.

A typical employee will save around £330 during the period 6^th July 2022 to 5^th April 2023 (during the remaining 9 months of the tax year).

For those of you who are interested, the specific calculation is as follows:

£3,000 x 15.05% = £451.50 x 9/12 = £338.63

Employees will start paying National Insurance on earnings above £12,570 which is higher than what was originally planned (£9,880).

What does this mean to you and your business (as an employer)?

Simply put – you’ll deduct less from your employees when you process the payroll from 6^th July 2022.

Other than that, there won’t be a specific change to you (as the Employer), all you’ll see is the amount you deduct from your employees, and pay over to HMRC, will be less.  

*TIP* Make sure your payroll software is updated so the correct NI contributions are deducted from your staff.

Also, as a side note, the Employment Allowance was increased from £3k to £5k. Make sure you are claiming this (if applicable).

A little bit of background (if you’re interested):

Historically, the Primary Threshold (the level of earnings which an employee starts making National Insurance Contributions) has remained the same throughout the whole of the tax year (they don’t often change the threshold part way through the tax year).

This tax year (the 22/23 tax year which spans the 6.4.2022 to 5.4.2023) is different as the thresholds will change part way through the tax year.  

This change was announced during the Spring Statement whereby Rishi Sunak decided to change the Primary Threshold part way through the tax year.

OK, so what does this mean?

Well, from 6.4.2022 to 5.7.2022 the Primary Threshold is £9,880.

From 6.7.2022 to 5.4.2023 the Primary Threshold increased to £12,570.

As you can see, that’s an increase of £2,690.

This change affects the amount of National Insurance contributions an employee will pay.

To give an example:

Let’s assume you have a staff member who is paid a salary of £26k.

In June they had around £178 of NI deducted from their pay.

In July they’ll have £148 of NI deducted from their pay.

As a result, their net pay (what they physically receive), will be £30 more.

In addition to this, from April 2022 the Government introduced the ‘Health & Social Care Levy (HSCL)‘which is an extra tax levied on both employees and employers.

From April 2023 the HSCL will be a totally separate deduction from an employee’s pay, but for the tax year 2022-23 it is being collected by raising NIC rates by an extra 1.25%.

If you’d like any guidance on the above, or if you have any questions, please get in touch. 

More detail on the National Insurance thresholds is included here.