NIC thresholds change

National Insurance Contributions (NIC) rates increased for everyone by 1.25% from 6 April 2022, but the thresholds for employee’s NIC were raised from 6 July 2022 (see table below).

This means that most employees will have more NIC deducted from their pay in April to June 2022 and more low earners will pay no NIC from July 2022 onwards.

The threshold from which employers must pay Class 1 NIC on their employees’ salaries is not changing, remaining at £9,100 per year (£758 per month) for most employees. Where the employee is an apprentice or aged under 21, the employer is not due to pay class 1 NIC until the employee’s pay exceeds £50,270 per year (£4,189 per month). This also applies for ex-armed services personnel in their first 12 months of civilian employment.

As NIC is paid according to the pay period rather than being cumulative, only nine months of employees’ earnings (from 6 July 2022 to 5 April 2023) will benefit from the higher threshold.

Company directors tend to be paid annually or quarterly. Those on quarterly pay must use the lower primary NIC threshold for the first quarter to 5 July 2022 and the higher primary NIC threshold for the remainder of the year. Directors who pay themselves annually must use a primary threshold of £11,908 for 2022/23.

The Employment Allowance has also increased from £4,000 to £5,000 for 2022/2023. This allowance provides relief against employer’s Class 1 NIC. However, it is unavailable in certain circumstances, including where the director is the sole employee of the company.

The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice.  Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.