03 January 2024

The main rate of class 1 employee NICs will be reduced to 10% from 6 January 2024. This mid tax year change takes shape in a 2-percentage point decrease.

Employees whose employer (or the employer’s payroll service provider) can make the relevant changes to their payroll system in time, over an already busy festive period, will benefit from the reduced rate of NI from January.

For those employers and service providers who don’t amend their payroll system in time for the January changes, they will be able to reimburse the overpayment of NI to employees in subsequent months.

Some key things to consider:

  • ensure your software is up to date, and carry out some test runs to ensure changes have been made
  • if using HM Revenue and Customs (HMRC’s) Basic PAYE Tools, ensure you are using the most recent release
  • directors who have left within the 2023/24 tax year will need their NICs recalculated to take the blended rate of class 1 NICs into consideration
  • directors who remain in employment and have their NICs calculated using the alternative method, will need to be changed to the cumulative calculation in their final pay period of the tax year, to ensure their NICs are calculated using the blended rate.

For more information on the blended rates to use for directors, please refer to our previous news article here.

The CIPP recommends employers use payslip messaging in January to ensure employees are aware of why they will have seen a reduction in the amount of NI contributions on their payslip. Our 2023 Payslip Statistics Report shows that from the employers who used the payslip messaging for the implementation of the health and social care levy, 77% confirmed they didn’t receive any further queries around the changes to NI into the payroll department. Our research shows this method of communication works wonders in informing employees of changes, alongside reducing the number of queries received by the payroll department / service provider.

Information provided in this news article may be subject to change. Please make note of the date of publication to ensure that you are viewing up to date information.