National Insurance Contributions
Thresholds and rates (Table D)
The thresholds above which employer’s and employee’s National Insurance Contributions (NIC) become payable will increase in line with inflation in 2022/23. The upper limits for employee and self-employed contributions remain aligned with the point at which 40% income tax is payable (£50,270 per year, or £967 per week), and are frozen at that level until the end of 2025/26.
As announced on 7 September 2021, a new Health and Social Care Levy will be charged to raise £13 billion a year – dwarfing most of the other figures in the Budget policy decisions. In 2022/23, this will be achieved by raising the rates of NIC; in 2023/24, the levy will be formally separated from NIC and collected separately by HMRC, and will also apply to earnings that are not charged to NIC (principally earnings of individuals who are above State Pension age).
From 6 April 2022, Class 1 NIC paid by employers and employees, and Class 4 NIC paid by self-employed people, will increase by 1.25%. This means that employees
will pay 13.25% from the primary threshold up to the upper earnings limit and 3.25% above that; employers will pay 15.05% on all earnings above the secondary threshold. Self-employed people will pay 10.25% on earnings between £9,880 and £50,270 and 3.25% above that. The rates will revert back to their previous levels from 6 April 2023 when the separate levy is introduced.
The increase in the rates is offset to a very small extent by the increase in the thresholds below which no NIC are due. For example, the contributions for an employee with a salary of £50,000 will rise from £4,852 to £5,316 (employee’s) and from £5,680 to £6,155 (employer’s).
An employer taking on ex-service personnel in their first year of civilian employment is eligible for a nil rate of employer’s NIC on earnings up to £967 per week. In 2021/22 the NIC had to be paid and reclaimed at the end of the year, but from 6 April 2022 it
is expected that the PAYE system will allow for a nil rate of contributions under Real Time Information.