National Insurance rise will be reversed from 6 November 2022

In advance of the Emergency Mini-Budget, Chancellor Kwasi Kwarteng has announced that the 1.25 percentage point rise in National Insurance will be reversed from 6 November 2022.

The reversal was expected.  See our previous article: What's happening with National Insurance Contributions?

The rise took effect in April 2022 in advance of a Health & Social Care Levy to be introduced from next year. However, Prime Minister Liz Truss made it clear during her leadership bid that the rise would be reversed.

Repeal of the Health & Social Care Levy

It has also been confirmed that the Health and Social Care Levy, due to take effect from next April, will be cancelled. Social care services will be paid for out of general taxation.

The Health and Social Care Levy (Repeal) Bill, legislating for the tax change, has been introduced into Parliament today.

Dividend tax rates

The Chancellor is also set to confirm that the increases to dividend tax rates will be scrapped from April 2023 in his mini Budget tomorrow.

The increased dividend tax was introduced in April 2022 to ensure those who gained income from dividends contributed the same amount to help fund health and social care.

The Chancellor confirmed today that the funding for health and social care services will be maintained at the same level as if the Levy was still in place.

National Insurance Thresholds

National Insurance thresholds increased in July 2022 to lift low paid workers out of paying the tax. The Chancellor has committed to retaining the level of these increased thresholds.

Payroll

Most employees will receive the NIC cut via payroll in their November pay, with some receiving it in December or January, depending on the complexity of their employer’s payroll software.

The extra contributions people paid from 6 April 2022 to 5 November 2022 will not be refunded, although refunds will be given for contributions made after 6 November 2022 where software developers were unable to implement the changes in time.

Although employees should automatically receive their NIC cut, 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.

The Employment Allowance is a relief which allows eligible businesses to reduce their employer NICs bills each year. At the Spring Statement on 23 March 2022 the previous Chancellor announced this would be rising by £1,000 from £4,000 to £5,000. The threshold will remain at £5,000.

The Government has also confirmed that the Class 1A (P11D(b) reporting) and Class 1B (PAYE Settlement Agreement reporting) NICs rates for 2022/23 will be 14.53% for the full tax year.

National Insurance guidance for software developers working with payroll software has been published.

Further information

If you would like to discuss how these changes will affect you or your business, please contact your usual Bishop Fleming advisor, a member of the tax team.