The National Insurance (NI) rates and thresholds are reviewed each year. HMRC has recently published the applicable amounts for the forthcoming 2022/23 year. What are the most important points for our clients to know?
As part of the ongoing efforts to recoup the cost of the coronavirus support measures, the National Insurance (NI) guidance shows there will be no increase to the Upper Earnings Limit for Class 1 NI or upper profits limit for Class 4 NI. These both remain aligned with the income tax personal allowance, which is frozen at £50,270 for 2022/23.
Lower changes. At the lower end of the scale, there are changes. The Class 1 NI lower earnings limit will increase to £123 per week (£6,396 per annum).
Pro advice. This is the point at which NI contributions are deemed to be paid for the purposes of accruing entitlement to certain benefits, including the State Retirement Pension.
The primary threshold, the point at which employee contributions actually become payable, is to increase to £190 per week, or £9,880 per annum.
Pro advice. This is important for clients who are small company owners following a typical small salary plus dividend profit extraction strategy. As the personal allowance is frozen at £12,570, the benefit of opting for a salary equal to the primary threshold is gradually being eroded.
Employer contributions won’t be payable until earnings exceed £175 per week (£9,100 per annum). Self-employed clients will also see changes, with the Class 4 payment threshold increasing to £9,880 as well. Class 2 contributions will increase by 10p to £3.15 per week.
Kim Redwood-Lee says “Of course, 2022/23 will also see an across-the-board increase in NI rates for a year while the infrastructure to collect the new Health and Social Care Levy next year is set up. Our clients should ensure their payroll software is up to date to allow proper collection. The rates will be 13.25% for individuals earning between the primary threshold and upper earnings limit (or the self-employed equivalent), and 3.25% above this”.
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About Oscar Fairchild
Oscar Fairchild is an experienced accountancy and bookkeeping practice based in Billericay, Essex. We offer a comprehensive range of services including Self-Assessment, Annual Returns, VAT Returns, Credit Control, Payroll, Auto Enrolment Pensions, and Management Accounts. We work with SMEs, businesses in the construction sector, and a wide range of industries in between – including licensed London taxi drivers – across London, Essex, and Hertfordshire.
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