National Insurance Changes for April 2022
The Health and Social Care Levy
There will be more details released nearer the time but as previously announced there are National Insurance changes for April 2022 where employer and employee National Insurance contributions will be raised by 1.25%. This will just be for one year then the Health and Social Care Levy of 1.25% will be introduce in April 2023.
The increase from April 2022 is for those who currently pay National Insurance contributions but the new Levy in April 2023 will also include those above the state pension age but still in work. This means employees with NI Category C will also pay the Health and Social Care Levy if they are still working. The Levy will not be charged on pensions.
The increase in April 2022 will be reported via RTI in the usual way and may be shown separately on the payslip. We have not seen any working examples yet and do not know if we will be able to split out the additional amount or not. The Levy should be shown separately on the payslip from April 2023.
Calculating National Insurance
National Insurance is not straightforward to calculate but at least is not impacted by tax codes. There are National Insurance Categories where some individuals may not pay National Insurance or employers may be exempt but most employees fall into Category A with full National Insurance applied.
To calculate National Insurance there are a few thresholds that need to be known, usually the Primary Threshold, Secondary Threshold and Upper Earnings Limit.
For NI category A:
- Primary Threshold: The employee pays NI on earnings above this threshold. The rate is currently 12%, so will rise to 13.25% in April 2022. The current threshold is £797 per month.
- Secondary Threshold: The employer pays NI on earnings above this threshold. The current rate is 13.8% so will rise to 15.05% in April 2022. The employer pays NI on all earnings above the threshold which is currently set at £737 per month.
- Upper Earnings Limit: The employee contributions drop to 2% above this limit, currently £4189 per month. There will be an additional 1.25% from April 2022.
For other NI Categories there may be different thresholds and the action at each threshold may change.
What is the impact?
Payroll will increase in complexity again, which was our immediate observation, but there will be an impact on employees and employers.
The government has published the expected impact on individuals: a typical lower rate taxpayer will pay around an additional £180 per year and higher rate taxpayer an additional £715. Employers will also be impacted as their whole National Insurance Liability will increase.
There are new NI Categories arriving in April as well but full & final details have not been published. We expect at least one of the new letters will be associated with forces veterans where there is no employer’s National Insurance to pay.