National Insurance & PAYE changes announced in the September Mini-Budget
The government has cancelled most elements of its mini-budget
*Chancellor Jeremy Hunt has cancelled almost all of the tax cuts announced in the mini-budget. The Autumn Statement is due to be delivered on 17 November by Jeremy Hunt.*
On 22 September 2022, the UK government announced a number of changes relating to National Insurance affecting the 2022 to 2023 tax year. These changes take effect from 6 November 2022. This means employees and employers will pay less National Insurance on the same amount of their income and will notice a decrease in their NI contributions (NICs).
The UK government also announced two changes to PAYE taxation which will come into effect from 6 April 2023 and a reversal of a previous policy on Health and Social Care Levy which will no longer come into effect from next tax year.
Detail of National Insurance changes
- A new rate of Class 1 NICs for both employers and employees for earnings paid on or after 6 November for the remainder of the 2022-23 tax year:
- For all employees paying NICs on earnings above Primary Threshold, the rates decrease by 1.25% from 6th
- For all employers paying NICs on employee earnings above Secondary Threshold, the rates decrease by 1.25% from 6th
- The rate of Class 1A (excluding sporting testimonials and termination payments reported on an RTI return) and Class 1B will be a revised annualised rate for the 2022-23 tax year.
- The rate of Class 1A for sporting testimonials and termination payments reported on an RTI return is the rate that applies at the time of the payment of the general earnings or amount.
- For those self-employed individuals who pay NICs through the annual Self-Assessment process, a revised annualised rate will be payable on income reported for the 2022-23 tax year. The return for this is due by 31 January 2024 and calculations will be made by the Self-Assessment system.
- A revised annualised Class 1 NICs rate will also apply for directors. As an example, for a Director on the standard method and on NI table A this rate will be 12.73% on earnings above PT and 2.73% on earnings above UEL.
- The message on payslips for the tax year 2022-2023 to explain the reason for the NICs uplift will not be applicable from 6 November 2022 and will be removed.
Detail of PAYE tax changes
- The 45% upper rate of PAYE is scrapped from 6th April 2023.
- The basic rate of PAYE is reduced by 1% from April 2023.
Detail of Health & Social Care Levy changes
- The Health & Social Care Levy, previously announced to begin on 6th April 2023, has been scrapped.
Off Payroll Worker changes
The government announced a reversal of IR35 reforms for off-payroll workers. No specific details have been announced as to how the reversal will affect payroll but further information is expected from HMRC in due course.