Introduction
- In the Autumn Budget, the chancellor announced a hike in national insurance to cover the spiralling costs of the COVID-19 pandemic.
- From 6 April 2022, there will be a temporary increase of 1.25% in Class 1, 1A and 1B National Insurance Contributions rates to 15.05% for employers.
- For employees, Class 1 rates also increase by 1.25% to 13.25% (below upper limit) and to 3.25% (above the upper limit).
- From 6 April 2023, Class 1, 1A and 1B revert back to the 2021/22 rates and a new Health and Social Care Levy will apply to both employers and employees at a rate of 1.25% (2.5% combined).
What is the Health and Social Care (HSC) Levy?
- This has been enacted to fund the NHS and adult social care and to offset the spending incurred by the NHS during the COVID-19 pandemic.
- Although the majority of employees will face a reduction in Net Salary from 6 April 2022 as a result of the temporary National insurance hike, from April 2023, the HSC levy will become a separate item on the face of employee’s payslips.
What should you do?
As an employer you should assess how this is likely to affect net earnings of employees.
It may be worthwhile considering other forms of renumeration such as salary sacrifice or other benefits such as bikes for work or childcare.
| Tax Year | Employers Class 1 NIC | Employees Class 1 NIC | Self-employed Class 4 NIC |
| Current year 2021/22 | 13.8% | 12% (between £9,568 and £50,270 the NIC Upper Earnings Limit) and 2% (above that limit) | 9% on profits between £9,568 and £50,270 and 2% payable on profits above £50,270 |
| 2022/23 | 15.05% | 13.25% (between £9,568 and £50,270 NIC Upper Earnings Limit) and 3.25% (above that limit) | 10.25% on profits between £9,568 and £50,270 and 3.25% payable on profits above £50,270 |
| Effective Increase in % | 8.31% | 9.43% > Combined = 17.74% | 12.2% |