National Insurance contribution increase

National Insurance contributions in April 2022. What do employers need to know?

The HMRC is encouraging employers to notify their workers of a temporary increase in National Insurance that is being introduced in April 2022.

From Wednesday 6th April 2022 until Wednesday 5th April 2023, many workers will find an increase of 1.25 percentage points to their National Insurance contribution.

This increase will take place as part of the new Health and Social Care Levy, which is intended to support and fund the NHS, as well as health and social care within the UK.

From Thursday 6th April 2023, the temporary increase to the National Insurance contribution will end and return to the figures seen in 2021-2022.

However, there will instead be a separate tax of 1.25% introduced for eligible employees.

The initial increase in National Insurance contribution will apply to employers, employees and those who are self-employed, and below the state pension age.

However, the 2023 Levy tax will also extend and apply to those over the State Pension age.

Only pensioners who no longer work will be omitted from the Levy.

National Insurance thresholds

Alongside the increased National Insurance contribution, there will also be an increase in the threshold at which National Insurance contributions apply.

As of April 2022, there will be a rise from £9,568 to £9,880.

However, Chancellor Rishi Sunak recently announced that there will be an additional rise to the threshold that will take effect as of Saturday 16th July 2022, taking the threshold before which employees are required to pay National Insurance contributions up to £12,570.

This may therefore also impact the existing rates of pay for employees, and their employers, who are eligible to contribute to National Insurance.

What do employers need to do?

In the meantime, for employees who are eligible to receive the increased NI contributions, HMRC have asked that employers update the payslips for the 2022/2023 tax year to include the following message:

“1.25% uplift in NICs funds NHS, health & social care.”

Additionally, for those eligible for the subsequent 1.25% levy tax from April 2023, there should also be a clear indication of this on employees’ payslips.

The HMRC have stated that they have contacted any payroll software providers and asked them to include the above message on the payslips they issue.

This should hopefully apply to the April 2023 tax, although we would recommend that employers check with their payroll service provider closer to the time.

Another important consideration for employers is that this extra cost of 1.25% from April 2022 will also increase the employer’s wage bill, along with any additional payments to employees that will increase (e.g., bonuses).

If you are unsure about any of the changes mentioned above, click here to read the full guidance by the government on how to prepare for the Health and Social Care Levy.