POSTED: September 17 2021
National Insurance Changes – Notes for Employers

National Insurance Changes – Notes for Employers

On the 7 September, the Prime Minister announced a ‘health and social care levy’, of 1.25% would be added to National Insurance Contributions from April 2022, for both employers and employees.

Changes from April 2022
  • Most forms of National Insurance will increase by 1.25% with no cap.
  • For employees, this means NI Contributions will now amount to 13.25%, up to the Upper Earnings Limit – then 3.25% after.
  • For employers, the NI contributions increase to 15.05%.
  • The same 1.25% increase will be added to Class 1A and 1C employer costs.
  • Employers are being encouraged to include a payslip message to show the increase in NICs relate to the levy. It has also been confirmed that the levy amount can be offset against the employment allowance for those eligible.
Changes from April 2023
  • UK National Insurance rates will revert back down to the current rates and percentages, and the Health and Social Care Levy will become a stand-alone deduction, of the percentages discussed previously. It must therefore be reported as a separate deduction on payslips, employers RTI and other returns, such as the P11Db.
  • Once separate, the levy will be chargeable to those over the State Pension Age, who are in employment. It has been confirmed that the stand-alone levy will still be linked to NI thresholds – but there is still clarity required around other areas such as the Veterans NI holidays.
  • It is believed more information will come to light in the coming months.

The government has announced they intend to compensate “departments and other public sector employers” in England. However, public sector workers such as school staff will still be required to pay the increase in their personal NI contributions – the compensation will only cover employer contributions. Further details are expected at the next spending review.

What happens next

The first step in preparation from April 2022 is to prepare those managing payroll processes for the adjustment, to ensure they are meeting legal obligations and making the correct deductions from employee wages.

It would be beneficial to send a reminder to staff, so they are aware well in advance there will be a decrease in take home pay, due to the increase in National Insurance payments.

It’s likely that some employees will understandably be upset about this, but as an employer, you are under no obligation to provide additional benefits, or pay increases to cover the difference. It will likely be worth highlighting that the increase is not a business decision, but a step mandated by the Government.

The first changes do not take effect until April 2022 – so employers should use this time to prepare themselves. The upcoming changes to payroll are likely to be challenging for organisations with no dedicated payroll department.  If you feel these changes could cause issues for your small or medium business, now is an ideal time to look into outsourcing your payroll. Talk to advo today about our dedicated team of payroll experts.