Tag: National Insurance

Reversal of Health and Social Care levy

A49265B2-0D66-4811-A3D8-4571301DC086Reversal of Health and Social Care levy

  • The government is cancelling the Health and Social Care Levy – initially introduced via a 1.25 percentage point rise in National Insurance contributions (NICs) – which took effect in April 2022. 
  • This will be delivered in two parts: 
    • The government will reduce National Insurance rates from 6 November 2022, in effect removing the temporary 1.25 percentage point increase for the remainder of the 2022-23 tax year; 
    • The 1.25% Health and Social Care Levy will not come into force as a separate tax from 6 April 2023 as previously planned. 
  • It means 28 million people across the UK will keep an extra £330 a year, on average, in 2023-24. 
  • The government is making this change as quickly as possible, with it coming into force on 6 November. 

When will people receive the extra cash? 

  • Most employees will receive the cut in their November 2022 pay directly via their payroll. 
  • Basic rate taxpayers will on average see a gain of approximately £75 in 2022-23 rising to £175 in 23-24. For higher rate taxpayers, these figures are on average approximately £300 in 2022-23 rising to £700 in 23-24. For additional rate taxpayers, the gain will be on average approximately £1,650 in 2022-23 rising to £3,890 in 23-24. 
  • Due to the complexities of some payroll software systems, there will be some people who receive the cut backdated in December 2022 or January 2023. 
  • Although individuals should contact their employer for refunds as a first port of call in all circumstances, there may be circumstances where individuals may need to apply to HMRC for a refund (for example, if their employer is no longer trading, or if an individual has moved roles and their previous employer has confirmed they are unable to issue a refund retrospectively themselves). 

Voluntary National Insurance Contributions

NI Card PictureGaps in your National Insurance record

You may get gaps in your record if you do not pay National Insurance or do not get National Insurance credits. This could be because you were:

  • employed but had low earnings
  • unemployed and were not claiming benefits
  • self-employed but did not pay contributions because of small profits
  • living or working outside the UK

Gaps can mean you will not have enough years of National Insurance contributions to either:

You may be able to pay voluntary contributions to fill any gaps if you’re eligible.  You can check your National Insurance Contributions status here

Decide if you want to pay voluntary contributions

Voluntary contributions do not always increase your State Pension. Contact the Future Pension Centre to find out if you’ll benefit from voluntary contributions.

You may also want to get financial advice before you decide to make voluntary contributions.

Paying an employee after giving them a P45

You need to tell HM Revenue and Customs (HMRC) when one of your employees leaves or retires, and deduct and pay the right tax and National Insurance.

You must give your employee a P45 when they leave.

Paying an employee after giving them a P45

If you have to pay an employee after they leave (including someone you’re giving a taxable redundancy payment over £30,000):

  • use tax code 0T on a ‘week 1’ or ‘month 1’ basis (use the code S0T if they’re taxed at the Scottish rate or C0T if they’re taxed at the Welsh rate)
  • deduct National Insurance (unless it’s a redundancy payment) and any student loan repayments as normal – but if it’s an ‘irregular’ payment like accrued holiday pay or an unexpected bonus, treat it as a weekly payment
  • report the payment and deductions in your next FPS, using the employee’s original ‘Date of leaving’ and payroll ID, and set the ‘Payment after leaving’ indicator
  • give the employee written confirmation of the payment showing the gross amount and deductions
  • add the additional payment in the ‘Year to date’ field if the payment is in the same tax year

The payment should be the only one in the ‘Year to date’ field if it’s being paid in the next tax year.

You must not give the employee another P45

National Insurance

NI Card PictureYou pay mandatory National Insurance if you’re 16 or over and are either:

  • an employee earning above £184 a week
  • self-employed and making a profit of £6,515 or more a year

The amount of National Insurance you pay depends on your employment status and how much you earn.

If you’re employed

You pay Class 1 National Insurance contributions. The rates for most people for the 2021 to 2022 tax year are:

Your pay Class 1 National Insurance rate
£184 to £967 a week (£797 to £4,189 a month) 12%
Over £967 a week (£4,189 a month) 2%

National Insurance increase from April 2022

From 6 April 2022 to 5 April 2023 National Insurance contributions will increase by 1.25%. This will be spent on the NHS and social care in the UK.

The increase will apply to:

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

The increase will not apply if you are over the State Pension age.

You can find more details here