Autumn Budget 2021 – National Insurance contributions
27 October 2021
Limits and thresholds
As announced in the March 2021 Budget, the Upper Earnings Limit (UEL) remains aligned to the tax Higher Rate Threshold and will be frozen at its 2021-22 level of £50,270 (annual) for 2022-23 and until April 2026.
October’s Budget confirmed that other limits and thresholds will be increased by September’s Consumer Price Index (CPI), which was 3.1%.
Rates
As announced in September 2021, all NICs rates will increase by 1.25% for the 2022-23 tax year. This breaks the Government’s tax lock pledge but, it argues, the increase needed to provide dedicated extra funding for the NHS and for the Government’s adult social care reforms.
NICs rates return to 2021-22 levels from 2023-24 onwards, when the 1.25% charge becomes the Health and Social Care Levy.
Class 1 rates
|
Current |
For 2022-23 |
Employee |
|
|
On earnings up to LEL |
Nil |
Nil |
On earnings between LEL and PT |
0 |
0 |
On earnings between PT and UEL |
12.0 |
13.25 |
On earnings above UEL |
2.0 |
3.25 |
Married women’s reduced rate |
5.85 |
7.1 |
Deferred rate |
2.0 |
3.25 |
Employer |
|
|
On earnings up to LEL |
Nil |
Nil |
On earnings between LEL and ST |
0 |
0 |
On earnings above ST (with exceptions) |
13.8 |
15.05 |
On under 21s’ earnings between ST and UST |
0 |
0 |
On Apprentices’ earnings between ST and AUST |
0 |
0 |
On veterans’ earnings (year 1) between ST and VUST |
0 |
0 |
On Freeport workers’ earnings (years 1 to 3) between ST and FUST |
n/a |
0 |
On earnings over UST, AUST, VUST and FUST |
13.8 |
15.05 |
Class 1A and Class 1B rates
|
Current |
For 2022-23 |
Class 1A |
13.8 |
15.05 |
Class 1B |
13.8 |
15.05 |
Employer NICs holiday for Freeport workers
As previously announced, employer’s secondary NICs will be reduced to 0% on earnings up to a new Freeport Upper Secondary Threshold (FUST) for the first three years of employment for eligible workers at Freeport tax sites. There are currently eight sites approved for Freeports across England, with at least one expected in Scotland, Wales and Northern Ireland.
-
For tax year 2022-23, the FUST will be set at £25,000. The standard level of secondary NICs will apply to earnings from the FUST up to the UEL.
-
Eligible workers must spend at least 60% of their time working at the Freeport. They must not have been employed by the employer or by a connected company within the previous two years.
-
HMRC has introduced a range of NI category letters for relevant employees so that employers can claim this relief through PAYE.
This relief will be available from April 2022 to at least April 2026, with a possible extension to 2031.
Health and Social Care Levy
Brief details about the Health and Social Care Levy were announced in September, alongside the temporary increase in NICs rates. The Budget confirmed that the new Levy will apply to the equivalent of Class 1 and Class 4 NICable earnings at a rate of 1.25% from April 2023. However, a key difference is that it will apply to the employment earnings of those over State Pension age (category letter C).
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