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In September 2021, the government announced plans to increase funding for the NHS, health and social care by:
Despite recent speculation that the government may defer those plans, it’s understood that the government is still committed to increasing the NICs rates and introducing the Levy.
In this Insight, we look at how the NICs rates increases and the Levy will affect employers and what steps employers should take to ensure that their employees are aware of the changes and that the correct deductions are made from relevant payments made to their employees.
Although the Levy will not apply until 6 April 2023, employers and employees will both be required to pay an increased rate of Class 1 NICs from 6 April 2022. In addition, employers will also pay an increased rate of Class 1A and Class 1B NICs from the same date.
The increase in Class 1, Class 1A and Class 1B NICs will be 1.25%.
This means that from 6 April 2022, employees below the State Pension Age will pay employee Class 1 NICs at a rate of 13.25% on pay over £797 per month and at a rate of 3.25% on pay over £4,189 a month.
Employers will pay employer Class 1 NICs at an increased rate of 15.05% on pay over £737 per month.
The increase in Class 1, Class 1A and Class 1B NICs is temporary and will end on 5 April 2023. These rates will then revert to current levels.
From 6 April 2023, the Levy will become payable by employees at a rate of 1.25% whenever a liability to employee Class 1 NICs arises.
It should be noted that unlike Class 1 NICs, the Levy will be payable by employees who are above the state pension age (66 years) and therefore employers will need to ensure that this requirement is taken into account in the operation of the employer’s payroll from 6 April 2023.
The Levy will also be payable by employers at a rate of 1.25% whenever:
Yes. All existing NICs reliefs will apply to the Levy including:
Earnings on which NICs are calculated (or would be calculated where the employee is above state pension age) will be used to calculate the Levy.
For employees and employers, the Levy will be collected through existing PAYE payroll.
Employers should ensure that their existing payroll (whether inhouse or external) will reflect the increase in NICs rates with effect from 6 April 2022.
Steps should be taken to comply with HMRC’s request that employers, where appropriate, include the following message on payslips of employees who have to pay the increased NICs between 6 April 2022 and 5 April 2023:
“1.25% uplift in NICs, funds NHS, health & social care”.
Employers may wish to consider whether any additional communication to employees would be helpful, prior to 6 April 2022, to ensure that employees are aware of both the amount, and purpose, of the NICs increase.
Contributors: Laura Allum and Sarah Maddock
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at February 2022. Specific advice should be sought for specific cases. For more information see our terms & conditions.
16 February 2022
Legal Director Belfast
Senior Associate Belfast