National Insurance rates and thresholds from April 2022

National Insurance rates and thresholds from April 2022

In line with the Autumn 2021 budget, the National Insurance Contributions will increase on 6 April 2022 to fund the government’s NHS and social services funding.

The Health & Social Care Levy, originally announced in September 2021 before the Budget, will result in a temporary rise in the rate for NICs starting in April 2022 by 1.25%. This will be applicable to both employees and employers.

The 1.25% Health and Social Care Levy will replace the NIC rates, which will return to their original levels as of 2023/24. This will be applicable to employees, employers, and self-employed (including those over State pension age).

HMRC confirmed the 2022/23 rates of NIC in an email sent to software developers.

In line with CPI inflation up to September 2021, the lower NIC thresholds will be raised by 3.1%. However, inflation reached 5.4% in Dec 2021.

As previously announced, the upper earnings limit, secondary thresholds, and profits limit will continue to be aligned with the unchanged higher rate threshold of PS50,270 in 2022/23.

Health and Social Care Levy

The Health and Social Care Levy Act 2020 imposes a 1.25% tax on profits or earnings that an employer or employee is already liable for paying Class 1, Class 1A, or Class 1B NICs.

The Levy will be subjected to the same exemptions, thresholds, and requirements as NICs.

As mentioned above, a temporary 1.25% rise in NICs’ main and added rates will be effective from 6 April 2022. This temporary increase will be in effect for the 2022/23 fiscal year.

The Levy’s revenue will fund the NHS, social care and health services. The Levy will take effect on 6 April 2023. NICs rates will return to their 2021/22 tax years.

The Levy will be separate from NICs starting April 2023. It will also apply to earnings of individuals over State Pension age. NIC rates will return to 2021-22 levels.

Pressure is being placed on the Chancellor to delay the 1.25% rise due to rising living costs.

Refer to our separate article about the Health and Social Care Levy.

HMRC released new guidance on 31 January 2022 – Prepare to Pay the Health & Social Care Levy.

Freeports

Freeports Employer NICs Relief will be available starting 6 April 2022

All Freeport-based businesses will have the ability to reduce their employer NICs. This includes employers who have a business location in a Freeport tax site. It is not available for employees working in this area.

Employers based in, or employing workers within, a Freeport tax location can apply a zero secondary rate of employerNICs for employees’ earnings over the Secondary Threshold. This includes a new Freeport Upper Secondary Treshold. Below are the tables.

Only new employees must spend at least 60% of their work time in a Freeport tax site. The rate can be applied to the earnings of new hires starting in April 2022 and lasting for 36 months.

Refer to our separate article about the Plymouth Freeport.

HMRC has issued guidance 28 Feb 2022 for Freeport NICs relief.

Contributions to National Insurance

Only in 2022/23, the Health and Social Care Levy is collected by a temporary 1.25% rise in the main and extra rates of Class 1 and 4 NICs.

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