Spring Statement: NIC changes explained

Spring Statement: NIC changes explained
In a move to counter the impact of the Health & Social Care Levy (HSCL), which will see a 1.25% increase in National Insurance contributions (NIC) from 6 April 2022, the Chancellor raised the NIC threshold to £12,570 in his Spring Statement
From July 2022, the Primary Threshold and Lower Profits Limits (the points at which employees and the self-employed respectively start paying NIC) will increase. The Primary Threshold will rise to equal the income tax personal allowance (currently £12,570 per annum). The Lower Profits Limit will rise to £11,908 for the 2022/23 tax year.
The government estimates that this will mean that around 70% of workers will pay less NIC overall for the final nine months of 2022/23 but individuals earning a salary of more than £34,923 for the year will still pay more NIC overall.
For employers, there are a number of implications:
• Employers and payroll providers will need to make two changes in 2022/23 – one to introduce the increased rate of NIC from 6 April 2022, and a second to reduce NIC payable through the increase in the thresholds from July 2022.
• Those who do not pay employees NIC, which includes anyone over state pension age and those relying on benefits, will not benefit from the changes.
• The increase in the NIC threshold does not affect the point at which organisations start to pay employer’s NIC, so their liabilities will not be reduced by this new measure. However, to provide support for smaller employers, the Employment Allowance, which is available for organisations whose employers’ Class 1 National Insurance liabilities were less than £100,000 in the previous tax year, will be increased from £4,000 to £5,000 a year from April 2022. Smaller employers should check whether they are entitled to this allowance.