The UK government has confirmed the introduction of the 1.25% increase in National Insurance Contributions (NICs), (Classes 1, 1A and 1B) for the 2022/23 tax year.
The new rates will be 15.05% for employers. For employees the contributions will rise to 13.25% for those below the NIC upper earnings limit, and to 3.25% above the NIC upper earnings limit. Benefits in kind will be subject to the new Health and Social Care Levy (HSCL) from April 2023.
The one year increase in National Insurance rates is a temporary measure, while HMRC prepares their systems for the introduction of the HSCL. This will be payable by both companies and individuals at 1.25%, from 2023/24 onward, separately from NIC. The impact of the HSCL on internationally mobile workers is under review and information will be published by HMRC nearer the time.
The HSCL will be a ring-fenced fund, initially used to finance NHS services to help reduce the COVID-19 backlogs. It will also be used for the longer-term reform of the social care system.
The Government had been under pressure to delay the introduction of the levy and NIC increase, given rising inflation and the squeeze on household incomes. A postponement would have allowed companies to adjust to post-COVID market conditions and given them more time to plan in light of market conditions and the increased cost of wages as a result of the levy.
However, a delay was not granted, and the increase will be implemented from 6 April 2022.
There are very few planning opportunities to offset the changes, but it may be possible to accelerate bonus payments into the 21/22 UK tax year or review whether the company is making good use of salary sacrifice to offer benefits in kind to employees, saving them Class 1 NICs Employers’ NICs are still due.
For an internationally mobile employee, the additional NIC cost will also apply unless they hold a ‘certificate of coverage’ or A1 keeping them in their home social security scheme and out of the UK scheme.
