In anticipation of the end of the tax year, we have pulled together a Payroll Newsletter which details the changes you may need to action from 6 April 2022. This covers the well documented National Insurance 1.25% levy as well as the increase in NI thresholds outlined by the Chancellor in his Spring Statement. We also cover the increase in the National Living Wage, increase in the Employment Allowance announced yesterday and recommendations for dealing with Benefits in Kind. Finally we give our recommendation for Director Salaries for the next 12 months. You can read our newsletter below.
2022/23 National Insurance Contributions
The rates of National Insurance Contributions for workers and employers will increase by 1.25% from 6 April 2022. This is to provide extra funding for health and social care and will become a separate Levy from 2023/24. During his Spring Statement on 23rd March, The Chancellor announced the starting thresholds for Employee National Insurance Contributions (NICs) have been increased. Employees will therefore be liable to 13.25% NICs between £12,570, an increase from £9,568, and £50,270 a year. Employer contributions at 15.05% will start at £9,100 per year. While the NI rise will be going ahead, the government says 70% of people who pay National Insurance will pay less than last year – around £330 on average due to the increase in the thresholds. For 2022/23 the self-employed will pay 10.25% Class 4 NICs on profits between £9,880 and £50,270. Employees and the self-employed will pay 3.25% on earnings or profits in excess of £50,270 from 6 April 2022.
National Living Wage Increase
Among the announcements on Budget Day back in October last year, was an increase in the hourly rate for the National Living Wage (NLW) which was greater than inflation for those aged 23 or over, to £9.50 an hour. If we process your payroll, we will contact you if any changes are required but please consider this if you process your own payroll.
In view of the announced changes to the national insurance limits we are now advising the majority of our directors formerly on a salary up to the 2021/22 secondary national insurance limit (£8,840) to be paid salary of £12,570 in 2022/23. There may be a small amount of Employers National insurance due on this, but this would be exceeded by the corporation tax saving on the salary increase.
The Chancellor also announced in his Spring Statement that the Employment Allowance will be increased by £1,000 from 6 April 2022 to £5,000. This should benefit most small businesses with employees.
Payrolling benefit in kinds
HMRC are encouraging more employers to payroll employee benefits in kind rather than declaring benefits on the end of year P11d forms. If you would like to do this, you must login online and select the benefit to include on the payroll. Alternatively we can continue to prepare the form P11d for you.
If RS process your payroll for you, we will ensure the changes are actioned. If you would like to discuss in any more detail, please get in touch with us.