Changes to National Insurance Contributions from April 2022

Part 1: National Insurance (NICs) and Tax

At the start of a brand new calendar year, and the post holidays return to office, those of us in in-house and outsourced payroll teams are thinking about the imminent rate changes the new tax year brings in April. 

More importantly, we’ll be planning how to execute the new rates and thresholds across systems and processes to ensure a slick transition over, with no room for error.

Some actions on your to-do list are likely to be: 

• Data management and control: accurately record the new rates and thresholds centrally and ensure they are seeded out across your software,  systems and processes. 
• Payroll services training and best practice: share the changes with administration teams, and provide robust guidance for processing and resolving queries across the business. 
• Internal communication planning: let the wider employee network know about imminent changes to their deductions and prepare for queries.
• Audit current payroll management processes: generally the start of a new year and imminent tax year is a good time to get the house in order, carry out due diligence on payroll processes and ensure we’re working efficiently and effectively. 
• Compliance: always front of mind for payroll services, changes to rates and thresholds each April and remaining compliant during transition is always a great 

For many, this spiralling to-do list and laborious admin is the catalyst for seeking an outsourced payroll provider to lighten the administrative and automate payroll services. If you’re thinking about switching to managed payroll, this is the perfect time of year to get maximum benefit

One of the major changes that affect payroll services in the coming tax year is a temporary increase to NICs. In the new tax year from April 6 2022 until April 5 2023, HMRC have announced changes to NICs to fund the Health and Social Care Levy. This reflects a 1.25% increase in the main and the additional rates of Class 1 (paid by employees) and secondary class 1, 1A and 1B (paid by employers)

Sounds simple? Well no. Date for your diaries, that on April 6 2023, NICs will return to normal rates of 12% and 2%. From then, the 1.25% Health and Social Care Levy deductions will be collected as a separate tax under an additional pay field. 

Prepare payroll services to expect pushback and queries from employees across the board. Low paid earners – those around £20,000 – can expect to see around £130 additional annual deductions while those in the higher earning bracket – £100,000 and upwards – will see their annual deductions increase by around £1,130. As disposable income shrinks, the payroll calls and email queries will increase.

Some exemptions that may affect your employees:

• Current NI exemptions for employers will remain in place for employing: Under 21s
• The increase will not apply if you are over state pension age
• Apprentices under age 25
• Veterans in the first 12 months of civil employment
• Freeports Worker (from April 2022)

Payment of the levy will be reported through the usual channels for PAYE income tax/ NIC etc. through RTI and further details will follow on the reporting process/ fields for the Social Care Levy.

How could Qualitas outsourced payroll help? 

Your payroll department will undoubtedly be fielding lots of questions off the back of this update

Our Managed Payroll Services can take care of the entire payroll process, from end to end. Some of the features and benefits include: 

• Best-in-class software: We use the latest, greatest software and automations and can pass on economies of scale savings to you.  
• Improve compliance: Your payroll data is connected to real-time rates and thresholds data from HMRC, so compliance failures become a thing of the past. 
• Reduce costs: eradicate annual payroll training costs and time consuming administrative duties, as we manage everything for you. 
• Eliminate service administration: No more payroll queries or communicating changes. Our team will take care of all contact, with high SLA standards, from a company’ email account. 

Why Qualitas?

We have:

• 250+ medium and large enterprise clients across private and public sectors
• An extensive portfolio of small, medium and large business clients and partnerships with accountants in practice

We process:

• 50,000+ payslips every month
• £7 million+ in payments through our client BACS process each month

What’s more, we can mobilise at short notice to take control of your payroll services.

Ready to talk to us?

Get in touch today to discuss your requirements or for a no-obligation quote.

National Insurance rates and thresholds FY22/23 

See a summary of new NIC rates and thresholds 

Employee and employer Class 1 contributions rates and thresholds (£ per week)

Employee’s (primary) Class 1 contribution rates

Married woman’s reduced rate for (primary) Class 1 contribution rates

Employer’s (secondary) Class 1 contribution rates

Employer’s (secondary) Class 1 contribution rates for employees under 21

Employer’s (secondary) Class 1 contribution rates for apprentices under 25

Considering outsourced payroll services?

For many businesses, in this newer, legislatively heavy environment, outsourced payroll is a low-cost, high-value way to manage employee payroll. Letting payroll specialists take care of the complexities lets you focus on what you do best – running your business and generating profits.

Ready to talk to us about taking the pain out of your payroll? Speak to us today for a no obligation quote.