Autumn Budget 2021: What's new with NIC?by
Following yesterday’s Budget, detail in the red book revealed some NI income thresholds are also rising in line with inflation.
The rates and thresholds applying for 2022/23 were confirmed at the time of the Autumn Budget.
As announced at the time of the March Budget, the upper earnings limit applying for primary Class 1 purposes is frozen at its 2021/22 level of £967 per week (£4,189 per month, £50,270 per year). This maintains the alignment with the point at which higher rate tax becomes payable (which remains at £50,270 for 2022/23).
The upper secondary thresholds that are aligned with the upper earnings limit, namely those for employees under 21, apprentices under the age of 25 and armed forces veterans in the first year of their first civilian employment since leaving the armed forces, are also frozen at this level.
A new upper secondary threshold for new Freeport employees working for an employer with physical premises in a Freeport Tax Site will apply from 6 April 2022, set at £481 per week. The first Freeport Tax Sites to be announced are Humber, Teesside and Thames.
The remaining thresholds are increased in line with the increase in the CPI to September 2021 of 3.1%. As a result, for 2022/23, the lower earnings limit is set at £123 per week, the primary threshold is set at £190 per week and the secondary threshold is set at £175 per week.
As previously announced, pending the introduction of the Health and Social Care Levy from 6 April 2022, the rates of Class 1, Class 1A and Class 1B contributions are increased by 1.25% for 2022/23 only. Consequently, the main primary Class 1 rate is 13.25%, the additional primary Class 1 rate is 3.25% and the rate payable by certain married women on earnings between the primary threshold and the upper earnings limit is 7.1%.
As far as employers are concerned, the rate of secondary Class 1 contributions, Class 1A contributions and Class 1B contributions is 15.05% for 2022/23.
The rates are due to revert to their 2021/22 levels from 6 April 2023 when the Health and Social Care Levy comes into effect.
National Insurance and the self-employed
The self-employed pay Class 2 and Class 4 contributions.
Class 2 contributions are weekly contributions payable where profits exceed the small profits threshold. For 2022/23, the small profits threshold is set at £6,725 and the Class 2 contribution rate is £3.15 per week. This can be paid voluntarily where profits are below the small profits threshold to maintain the contributor’s contribution record and is significantly cheaper than paying a voluntary Class 3 contribution.
The special Class 2 rate for share fishermen is set at £3.80 per week for 2022/23 and the special Class 2 rate for volunteer development workers is set at £6.15 per week for 2022/23.
The self-employed also pay Class 4 contributions on their profits. As previously announced, the upper profits limit (which is aligned with the upper earnings limit for Class 1 and the rate at which higher rate tax becomes payable) is frozen at £50,270. The lower profits limit is increased to £9,880.
As previously announced, the Class 4 rates are increased by 1.25% for 2022/23 only pending the introduction of the Health and Social Care Levy. As a result, the main Class 4 rate is set at 10.25% for 2022/23 and the additional Class 4 rate is set at 3.25% for 2022/23. The rates are due to revert to their 2021/22 levels from 6 April 2023 when the Health and Social Care Levy comes into effect.
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Voluntary Class 3 contributions
Individuals may opt to pay voluntary Class 1 National Insurance contributions in order to make up a shortfall in their contributions record. For 2022/23, Class 3 contributions are set at £15.85 per week.
The Employment Allowance, which can be set against an employer’s secondary Class 1 liability remains at £4,000 for 2022/23.
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Sarah Bradford BA (Hons) FCA CTA (Fellow) is the director of Writetax Ltd (www.writetax.co.uk) and its sister company, Writetax Consultancy Services Ltd. She writes widely on tax and National Insurance contributions and is the author of National Insurance Contributions 2020/21 published by...