As part of his Autumn Statement, Chancellor Jeremy Hunt announced a reversal of the temporary increase in National Insurance Contributions and the cancellation of the Health and Social Care Levy.
Back in September 2021, the government published proposals for investment in health and social care in England and then eventually also across the devolved governments. Of course, this investment needed funding, so the government introduced plans for a 1.25% Health and Social Care Levy, based on the National Insurance Contributions (NICs) system. This involved a temporary 1.25% increase to the main and additional rates of Class 1, Class 1A, Class 1B and Class 4 NICs for the 2022/23 tax year. From April 2023 and beyond, the NICs were intended to return to the 2021/22 levels as the 1.25% Health and Social Care Levy took over from the temporary increase.
However, in the Autumn Statement, Jeremy Hunt announced plans to reverse the temporary increase in NICs as well as cancelling the Health and Social Care Levy altogether. This has been done with the intention of reducing tax for 920,000 businesses next year, by nearly £10,000 on average. As the UK faces a recession, it’s hoped that the tax cuts and cancellation of the Levy will help not only help almost 28 million people in the UK save £330 on average in 2023/24, but should also save them an average of £135 this year!
These changes are implemented on payments or earnings made on or after November 6 2022. This means that primary Class 1 NICs (employees) will generally be reduced from 13.25% to 12% and 3.25% to 2%. Secondary Class 1 NICs (employers) will be reduced from 15.05% to 13.8%. The effect on Class 1A (payable by employers on taxable benefits in kind) and Class 1B (payable by employers on PAYE Settlement Agreements) NICs will be averaged over the 2022/23 tax year so that the rate will generally be 14.53%. For those in Class 4 (self-employed) a similar principle will be followed, where the NICs are averaged across 2022/23, making the rates 9.73% and 2.73%.
In July 2022, the NICs primary threshold and lower limit were increased to align with the personal allowance and will be frozen at this level from April 2023 until April 2028. Similarly, the Class 2 lower profits threshold will remain frozen from April 2023 to April 2028 in line with the lower profits limit. Not only this, but the government will fix the lower earnings limit and the small profits threshold at 2022/23 levels for the next tax year, at £6,396 and £6,725 respectively. The Class 2 and Class 3 NICs rates for 2023/24 will be uprated to £3.45 and £17.45 per week respectively. Finally, the level at which employers will be required to pay Class 1 NICs for their employees will remain fixed at £9,100 from April 2023 until April 2028.
We understand that this is a lot of information to take in, and if you have any questions about how the changes to NICs affect your business please don’t hesitate to get in touch with Chris Barlow:
+44 (0) 1 942 816 512
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