Since the 6th of April 2022, there has been a 1.25 percentage point increase in national insurance contribution (NIC) rates. However, the good news is that the Government has now decided to reverse this.
What Are The New NIC Rates?
Class 1 NIC rates have been reverted to the level they were at on the 5th of April 2022 but will only apply for pay periods beginning on or after the 6th of November 2022. Any NIC thresholds increased on the 6th of July 2022 will remain the same.
Employees Class 1 NIC:
- 12% (was 13.25%) on earnings in the band £1,048 to £4,189 per month (£12,570 to £50,270 per year)
- 2% (was 3.25%) on earnings above £4,189 per month (£50,270 per year)
Employers Class 1 NIC:
- 13.8% (was 15.05%) on earnings above £758 per month (£9,100 per year)
In this tax year alone, this will be the third change in NIC rates or thresholds. Nevertheless, the Government is confident that software developers can amend their payroll programmes in time for the November payroll run.
In the event that NIC is calculated over the entire tax year (i.e. on benefits or for a director who has an annual pay period), the rates for the year are blended. Directors will pay Class 1 NIC at 12.73% on earnings between £11,908 and £50,270, with 2.73% applying to earnings over £50,270. The director’s employer will pay Class 1 NIC at 14.53%.
Those who are self-employed will pay Class 4 NIC. This is calculated as a percentage of their annual profits with the final payment of income tax due for the year. The new rates of Class 4 NIC for 2022-2023 will be:
- 9.73% on profits between £12,570 and £50,270
- 2.73% on profits above £50,270
Some people may benefit from changing their planned remuneration strategies, particularly when it comes to the timing of payments. We can help you to determine the most efficient way for you to be paid or extract profits, so please do not hesitate to contact us to book an appointment.