There are important changes coming up in the next tax year, starting on the 6th of April 2022.
- National Insurance thresholds are changing.
- National Insurance rates are increasing.
- The National Minimum wage is increasing.
We’ll discuss these changes further down as they are relevant to payroll and workplace pensions.
National Insurance changes
After the 6th of April 2022, National Insurance thresholds and rates are changing.
- Class 1 NI thresholds will change in 2022/23
NICs are calculated based on the employee’s earnings, and based on these earnings employees are classified into classes. Each NIC class pays the equivalent rate on National Insurance Contributions.
The new NI thresholds for Class 1 for 2022/23 per week/month/year are:
Weekly NI thresholds
If payment is made every week, these are the NI thresholds for 2022/23.
| 2021-22 | 2022-23 | ||
| Lower Earnings Limit | £120 | Lower Earnings Limit | £123 |
| Primary Threshold | £184 | Primary Threshold | £190 |
| Secondary Threshold | £170 | Secondary Threshold | £175 |
| Upper Earnings Limit | £967 | Upper Earnings Limit | £967 |
This means that an employee earning less than £123 per week in 2022 won’t pay NICs. If their earnings are between the lower earnings limit and the primary threshold, then they pay for NI credits. NI credits give an employee access to NI benefits but they’re not NICs.
If an employee’s earnings are between the primary and secondary threshold per week – above £190 and below £967 – they will pay 13.25% (as of 2022/23) of their earnings in NICs. NI rates are different depending on whether the employee is a lower or upper earner – see below on NI rates. Employers also contribute 15.05% of NICs based on the employee’s earnings.
If an employee’s earnings are above the upper earnings threshold per week – above £967 – they will be paying 3.25% of those earnings in NICs in 2022/23.
Based on earnings and on the earnings threshold an employee reaches, they pay the equivalent rate of NICs.
Auto-enrolment pensions and Salary Exchange are set up and taken care of for you.
Monthly NI thresholds
If payment is made monthly, these are the NI thresholds for 2022/23.
| 2021-22 | 2022-23 | ||
| Lower Earnings Limit | £520 | Lower Earnings Limit | £533 |
| Primary Threshold | £797 | Primary Threshold | £823 |
| Secondary Threshold | £737 | Secondary Threshold | £758 |
| Upper Earnings Limit | £4,189 | Upper Earnings Limit | £4,189 |
Yearly NI thresholds
If payment is made yearly, these are the NI thresholds for 2022/23. The Primary Threshold will increase from £9,880 to £12,570 from July 2022.
| 2021-22 | 2022-23 | ||
| Lower Earnings Limit | £6,240 | Lower Earnings Limit | £6,396 |
| Primary Threshold | £9,568 | Primary Threshold | £9,880 |
| Secondary Threshold | £8,840 | Secondary Threshold | £9,100 |
| Upper Earnings Limit | £50,270 | Upper Earnings Limit | £50,270 |
- NIC rates will rise by 1.25% for both employees and employers.
The new NIC rates for 2022 for lower and upper earners are:
| 2021-22 | 2022-23 | ||
| Earnings threshold | Rate | Earnings threshold | Rate |
| Less than £9,568 | 0% | Less than £9,880 | 0% |
| £9,568-£50,270 | 12% | £9,880-£50,270 | 13.25% |
| More than £50,270 | 2% | More than £50,270 | 3.25% |
What this means is that, if an employee earns £30K in 2022:
- They will contribute 0% of NICs on the first £9,880 of their earnings.
- They will pay 13.25% of NICs on the rest £20,120. They will be contributing £2,665.9 to NI in 2022/23.
The new NIC rates for 2022 for employers have increased as well, from 13.8% to 15.05%. This means that an employer will contribute £3,028.06 of the employee’s earnings to their NI records.
Income Tax
There are no confirmed changes on Income tax rates or personal income tax allowance.
Earnings Thresholds
No changes on earnings thresholds, used to calculate the pension contributions on Qualifying Earnings, have been announced. There are no changes to the minimum pension contributions levels either.
To clarify, contributions to a workplace pension are based on the employee’s qualified earnings. The earning thresholds for workplace pension contributions haven’t changed for 2022/23 – if the employee’s annual qualifying earnings are between £6,240 and £50,270, they save for their pension.
| 2022-2023 | Annual | 1 week | 4 weeks |
| Minimum of qualifying earnings for pension contributions | £6,240 | £120 | £480 |
| Maximum of qualifying earnings for pension contributions | £50,270 | £967 | £3,867 |
National Living Wage
The National living wage will increase in 2022/23, from £8.91 to £9.5.
| Current Rate 2021/22 | Rate 2022/23 | |
| National Living Wage | £8.91 | £9.5 |
| 21-22 year old rate | £8.36 | £9.18 |
| 18-20 year old rate | £6.56 | £6.83 |
| 16-17 year old rate | £4.62 | £4.81 |
| Apprentice rate | £4.30 | £4.81 |
This change is important as employers cannot reduce the gross salary of an employee in a Salary Sacrifice scheme, below the National Living wage.
What do these changes mean for Salary Sacrifice?
Salary Sacrifice is a great way to reduce NICs and increase take-home pay, simply by reducing the gross salary.
These changes will affect Salary Sacrifice calculations accordingly. National Insurance contributions will lower according to the new rates and thresholds of 2022/23 for both employee and employer.
Learn more about how Salary Sacrifice will work for you here.
Husky helps both employees and employers
Husky helps employees and employers manage their workplace pension, as well as set up and manage Salary Sacrifice schemes.
Get in touch with us today.