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Changes to National Insurance: What Recruiters Need to Know

The Government has tinkered with National Insurance quite a lot recently, from the implementation of the Health and Social Care Levy in April, an increase to the Primary Threshold in July and further changes planned for April 2023. But how are your contractors affected? Here’s what recruiters need to know.

Health and Social Care Levy April 2022

In April 2022 the first stage of the Health and Social Care Levy was implemented. The measure came in as an increase to all rates of National Insurance, as well as income tax on dividends. All employees, including many of your contractors, will be affected as follows:

Employee Salary

NICs in tax year 2021/22

NICs in tax year 2022/23

£0-£9,568

0%

0%

£9,568 - £50,270

12%

13.25%

Above £50,270

2%

3.25%

Increase to primary threshold

From July 2022 the primary threshold and lower profits limit (for the self-employed) will increase from £9,880 to £12,570 in line with the personal allowance for income tax. Both the NICs threshold and the personal allowance will remain at these levels until April 2026. This could mean that some contractors take home more of their salary, despite the rise in rates at the start of the tax year. For example:

 

Tax year 2021/22

Tax year 2022/23

Salary

£20,000

£20,000

Income tax

£1,486

£1,486

Employee NIC

£1,252

£1,072

Net salary

£17,262

£17,442

Health and social care levy April 2023

In April 2023, the second stage of implementation of the Health and Social Care Levy is due to take place. Assuming this is implemented as planned, NIC rates will return to their 2021/22 levels, and the Health and Social Care Levy will be deducted as a separate tax. The Levy will use the same thresholds as National Insurance so most workers will see no difference in their take home pay.

Those workers who are over retirement age and therefore exempt from NICs will now pay the Health and Social Care levy, where they didn’t before.

Political uncertainty

At the time of writing the Conservative Party are in the process of electing a new leader, and the future of the UK tax system is being hotly debated. There is every chance that any and all of these changes could be walked back, the details changed or replaced with other measures entirely.

If you have questions or if we can help in any way, please call our expert team on 01296 468483 or email info@orangegenie.com.

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