The Chancellor announced a reduced impact of National Insurance on employees later this year. Historically national insurance is payable at a lower level of earnings than income tax, writes Andrew Law (pictured), Senior Tax Manager at Albert Goodman.
The primary threshold was set at £190 per week for 2022/23 (£9,880 p.a.) and this will rise to £241 per week (£12,570 p.a.), an increase of £51 per week, to bring it in line with Income Tax.
Employees are due to pay national insurance at 13.25% in 2022/23 tax year which means the increase saves £6.75 per week, or £351 in a full year. Employers also pay national insurance at 15.05% in 2022/23 but there was no mention whether the increased thresholds would apply to employers contributions.
The same threshold increases will apply to the self-employed who will save National Insurance at 10.25% – £275 p.a.
Whilst this is not a vast amount, every little helps, as the saying goes. National Insurances changes generally only start after the legislation comes into effect which is usually around July, which also allows software companies to update software, so there won’t be an immediate change in your pay packet.
In addition, employers will be able to claim a higher employment allowance of £5,000 instead of £4,000 for 2022/23.
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