From the 6th of April 2022, the national insurance contributions (NIC) rates increased by 1.25 percentage points. This meant that the NIC starting threshold rose to £12,570 per year (£1,048 per month) for employees.
What Do These Changes Mean?
The change in threshold means that some lower-paid employees will have more Class 1 NIC deducted from their pay from April 2022 to June 2022; however, they may pay no NIC from July 2022 onwards.
Employers, on the other hand, are not so fortunate. The threshold from which they pay Class 1 NIC on employees’ salaries will remain at £9,100 per year (£758 per month) for most workers. Those who are apprentices or under 21 will also have a higher threshold of £50,270 per year (£4,189 per month).
Directors of a family company who pay themselves every quarter will only benefit from the higher Class 1 NIC threshold from the 6th of July 2022. In contrast, directors who pay themselves annually must use a Class 1 NIC threshold of £11,908 for the entire tax year to the 5th of April 2023.
Along with NIC, the employment allowance has also risen from £4,000 to £5,000 for 2022-23. This allowance offers relief against the employer’s Class 1 NIC. However, it can only be claimed in the instance whereby the employer had a total NIC liability of less than £100,000 in the previous tax year, and the director is not the company’s sole employee.