National Insurance cuts – everything businesses need to know

The government has confirmed that it will reverse April’s temporary 1.25 percentage point uplift in National Insurance Contributions (NICs), effective from 6 November 2022. The cuts will see NIC rates return to their 2021/22 levels and reduce the NI bills of both individuals and businesses.

Here, the bookkeeping team at AMR Bookkeeping Solutions discuss what the cuts mean for businesses, and what payroll operators need to do to implement the new NIC rates.

Who will the changes in NICs apply to?

The NIC cuts will apply to employers, employees, and
self-employed people, affecting:

·        Class 1 National Insurance (paid by employees)

·        Class 4 National Insurance (paid by the
self-employed)

·        Secondary Class 1, 1A and 1B National Insurance
(paid by employers)

NICs will only be charged for earnings over the National
Insurance threshold of £12,570. Anyone earning less than the NI threshold will
pay nothing.

What will the new NIC rates be from 6 November?

Class 1 National Insurance

·        The main rate will be reduced to 12%

·        The additional rate will be reduced to 2%

Class 4 National Insurance

·        The main rate will be reduced to 9%

·        The additional rate will be reduced to 2%

Secondary class 1 National Insurance

·        The NI rate below the Secondary Threshold will
be reduced to 13.8%

·        Secondary class 1A and 1B National insurance

·        Class 1A and 1B rates for expenses and benefits
will be reduced to 13.8%

How to deduct the correct NICs from employees’ payslips

Most payroll software will automatically update from the 6
November 2022 and begin deducting the new NIC rates.

Currently, the NIC uplift of 1.25% has to be listed
separately on all employee payslips. Businesses that do not use an external
payroll provider should notify their payroll team to ensure they remove the
uplift on all payslips issued on or after the 6 November.

Do the rate changes affect the Employment Allowance?

No. The Employment Allowance allows small businesses to
reduce their NI liability by up to £5000 for the 2022/23 tax year. This means
employers can pay less Secondary Class 1 NICs until the allowance has run out,
or the tax year ends (depending on which comes first). The allowance is not
affected by the NIC rate cuts.

Need any further guidance? We can help with any aspect of
business payroll. To get in touch with the AMR Bookkeeping Solutions team,
email info@amrbs.co.uk, or give us a call
on 01892 559480.