The Budget 2022 and changes to National Insurance
Following on from the Chancellor’s Budget in March, in this second post about the implications of the changes outlined by Rishi Sunak, we take a look at National Insurance.
Employees’ National Insurance (NICs)
Increase in the National Insurance threshold and Lower Profit Limit
From 6 April 2022, there has been an increase in the annual National Insurance Primary Threshold and the Lower Profits Limit.
Primary Class 1 contributions are paid by employees. To align the starting thresholds for income tax and NICs the threshold will increase from 6 July 2022 from £9,880 to £12,570.
The Lower Profits Limit is the point where the profits of the self-employed become subject to Class 4 NICs. From 6 April 2022 the Lower Profits Limit is increased to £11,908 and from 6 April 2023, the limit is increased further to £12,570.
In addition, there will be no Class 2 NICs on profits between £6,725 and £11,908. NICs of £3.15 per week are payable where profits are over £11,908.
Temporary increase in National Insurance rates
From April 2022, there will be a temporary increase in the rates of NICs payable for employees, employers and the self-employed as a transitional provision in readiness for the introduction of the Health and Social Care Levy from April 2023.
With the increase to the thresholds announced in the Spring Statement, from 6 July 2022 employees earning between £242 (£190 from 6 April to 5 July 2022) and £967 per week will pay NICs at 13.25%. Earnings over £967 will attract a 3.25% charge. Employers will pay 15.05% on their employees’ earnings over £175 per week.
Although employees’ NICs only become payable once earnings exceed £242 per week, any earnings between £123 and £242 per week protect an entitlement to basic state retirement benefits without incurring a liability to NICs.
For the self-employed, where their profits exceed £11,908 per annum, they will pay 10.25% on the profits up to £50,270 and 3.25% on profits over that Upper Profits Limit.
You should contact us before taking any action as a result of the contents of this summary.
