Updated HMRC guidance on National Insurance threshold changes

How will NIC thresholds increase from July?

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At the Spring Statement in March, the Chancellor announced increases to the National Insurance rates from April 2022. The amount of the contribution will increase by 1.25% which will be spent on the NHS and social care across the UK.

This will be replaced by the new Health and Social Care Levy which will take effect from 6 April 2023.

This increase in National Insurance contributions will apply to:

  • Class 1 (paid by employees)
  • Class 4 (paid by self-employed)
  • Secondary Class 1, 1A and 1B (paid by employers).

Employers will only pay on earnings above the secondary threshold.

The Chancellor also announced that the primary threshold and lower profits limit will both increase from £9,880 to £12,570. This aligns the thresholds with the personal allowance and means that employees and self-employed people will pay National Insurance contributions on less of their income or profits.

July is the earliest date that will allow payroll software developers and employers to update systems and implement changes. From April, self-employed individuals with profits between the small profits threshold and lower profits limit will not pay Class 2 NICs.

Over the year as a whole, the lower profits limit – the threshold below which self-employed people do not pay National Insurance – is equivalent to an annualised threshold of £9,880 between April to June, and £12,570 from July 2022.

This means that the primary threshold rises from £190 to £242, while the upper earnings limit remains unchanged at £967. All employees pay a lower rate of National Insurance above this point.

The rise in the threshold will cut tax by an average £330 per worker although the introduction three months into the new tax year means that the actual average saving will be £267.

Further resources

HMRC: NIC rates and allowances 2022/23

ACCA Budget Hub