Background
The 1.25% increase in Class 1 National Insurance contributions (NICs) to help fund the NHS and Social Care has been in force since 6 April 2022, but with effect from last week the uplift in the National Insurance Threshold has also come into force. The increase brings the threshold at which employees will start to make NICs in line with the income tax threshold of £12,570 from 6 July 2022.
Employers must, if they have not done so already, ensure that their payroll software is up to date in order to process NIC deductions from employees pay correctly this month.
Detail
The Primary Threshold for National Insurance (NI), the point at which employees start paying NI, has increased from £9,880 pa to £12,570 with effect from 6 July 2022 in line with the income tax threshold.
The Secondary Threshold, the point at which employers start to make NICs on an employee’s salary, has remained unchanged at £9,100.
As a result of the change to the Primary Threshold for NI, employers will need to ensure that their payroll software has been updated prior to running a payroll for a payday falling on or after 6 July 2022. Most software providers should already have provided the necessary update but it is recommended that employers check the update has been installed, or contact their software provider, before running a payroll.
For those employers who use HMRC’s “PAYE basic tools”, it can be confirmed that the update is automatically applied at the appropriate time by opening the app, clicking “Settings” in the top right-hand corner and setting the automatic updates indicator to ”Yes” before processing the payroll.
If you would like more information on the changes to National Insurance, or their impact in determining the most tax efficient salary for your business, please contact our Tax Director, Jenny Marks.
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