Overview
As part of the Government's plan for growth, a 'mini-budget' statement was given on Friday 23rd September 2022 where the Chancellor announced several changes affecting payroll legislation. This article contains information and guidance for our Payroll customers.
Please note: Since the statement given on 23rd September 2022, there have been several U-turns on proposed changes, details of which have been updated in the information below.
Cancellation of the Health and Social Care Levy
The Health and Social Care Levy (set to be introduced as a separate tax in April 2023) will not go ahead and has been cancelled.
National Insurance Contribution Rates Changes
As part of the introduction of the Health and Social Care Levy, National Insurance Contribution (NIC) rates were increased by 1.25% for the 2022/2023 tax year, which will remain in effect from 6th April 2022 to 5th November 2022. From 6th November 2022 National Insurance rates have been reduced by1.25% for employer and employee Class 1 NIC rates.
For Directors' NIC, class 1a (excluding sporting testimonials and termination payments reported on an RTI return) and class 1b NIC, an annualised percentage rate has been provided to be used to calculate National Insurance on earnings paid between 6th April 2022 and 5th April 2023.
The breakdown of the National Insurance rate changes can be found below:
Employer and Employee National Insurance (Class 1 NIC) - Effective from 6th November 2022 to 5th April 2023
| Employee Contributions |
Employer Contributions |
||||||||
| Table Letter | Earnings below LEL | Earnings above LEL up to PT | Earnings above PT up to UEL | Earnings above UEL | Earnings below LEL | Earnings above LEL up to ST | Earnings above ST up to FUST | Earnings above FUST up to UST / AUST / VUST | Earnings above UST / AUST / VUST |
| A | NIL | 0% | 12.00% | 2.00% | NIL | 0% | 13.80% | 13.80% | 13.80% |
| B | NIL | 0% | 5.85% | 2.00% | NIL | 0% | 13.80% | 13.80% | 13.80% |
| C(over state pension age) | NIL | NIL | NIL | NIL | NIL | 0% | 13.80% | 13.80% | 13.80% |
| F(Freeport Standard) | NIL | 0% | 12.00% | 2.00% | NIL | 0% | 0% | 13.80% | 13.80% |
| H(Apprentice under 25) | NIL | 0% | 12.00% | 2.00% | NIL | 0% | 0% | 0% | 13.80% |
| I(Freeport MWRRE) | NIL | 0% | 5.85% | 2.00% | NIL | 0% | 0% | 13.80% | 13.80% |
| J(Deferment) | NIL | 0% | 2.00% | 2.00% | NIL | 0% | 13.80% | 13.80% | 13.80% |
| L(Freeport deferment) | NIL | 0% | 2.00% | 2.00% | NIL | 0% | 0% | 13.80% | 13.80% |
| M(Under 21) | NIL | 0% | 12.00% | 2.00% | NIL | 0% | 0% | 0% | 13.80% |
| S(Freeport over pension age) | NIL | NIL | NIL | NIL | NIL | 0% | 0% | 13.80% | 13.80% |
| V(Veterans Standard) | NIL | 0% | 12.00% | 2.00% | NIL | 0% | 0% | 0% | 13.80% |
| Z(Under 21 deferment) | NIL | 0% | 2.00% | 2.00% | NIL | 0% | 0% | 0% | 13.80% |
The rates effective from 6th April 2022 to 5th November can be found in the 2022/2023 Tax Year release note.
Directors' National Insurance (Class 1 NIC) - Effective from 6th April 2022 to 5th April 2023
For those calculating Directors' National Insurance using the standard annual earnings period method, an 'annualised' rate is to be used:
| Employee Contributions |
Employer Contributions |
||||||||
| Table Letter | Earnings below LEL | Earnings above LEL up to PT | Earnings above PT up to UEL | Earnings above UEL | Earnings below LEL | Earnings above LEL up to ST | Earnings above ST up to FUST | Earnings above FUST up to UST / AUST / VUST | Earnings above UST / AUST / VUST |
| A | NIL | 0% | 12.73% | 2.73% | NIL | 0% | 14.53% | 14.53% | 14.53% |
| B | NIL | 0% | 6.58% | 2.73%% | NIL | 0% | 14.53% | 14.53% | 14.53% |
| C(over state pension age) | NIL | NIL | NIL | NIL | NIL | 0% | 14.53% | 14.53% | 14.53% |
| F(Freeport Standard) | NIL | 0% | 12.73% | 2.73% | NIL | 0% | 0% | 14.53% | 14.53% |
| H(Apprentice under 25) | NIL | 0% | 12.73% | 2.73% | NIL | 0% | 0% | 0% | 14.53% |
| I(Freeport MWRRE) | NIL | 0% | 6.58% | 2.73% | NIL | 0% | 0% | 14.53% | 14.53% |
| J(Deferment) | NIL | 0% | 2.73% | 2.73% | NIL | 0% | 14.53% | 14.53% | 14.53% |
| L(Freeport deferment) | NIL | 0% | 2.73% | 2.73% | NIL | 0% | 0% | 14.53% | 14.53% |
| M(Under 21) | NIL | 0% | 12.73% | 2.73% | NIL | 0% | 0% | 0% | 14.53% |
| S(Freeport over pension age) | NIL | NIL | NIL | NIL | NIL | 0% | 0% | 14.53% | 14.53% |
| V(Veterans Standard) | NIL | 0% | 12.73% | 2.73% | NIL | 0% | 0% | 0% | 14.53% |
| Z(Under 21 deferment) | NIL | 0% | 2.73% | 2.73% | NIL | 0% | 0% | 0% | 14.53% |
For those calculating Directors' National Insurance using the alternative method, continue to calculate NIC using the regular employer and employee rates followed by a final annual calculation, ensuring any difference between the amount due and the amount paid to date is paid or refunded.
National Insurance on Expenses and Benefits (Class 1a and 1b) - Effective from 6th April 2022 to 5th April 2023
For class 1a NIC, excluding sporting testimonials and termination payments reported on an RTI return, and class 1b NIC, an annualised percentage rate has been provided to be used to calculate employer National Insurance on benefits and expenses given to employees between 6th April 2022 and 5th April 2023:
| Employer Contributions |
|||||
| Table Letter | Earnings below LEL | Earnings above LEL up to ST | Earnings above ST up to FUST | Earnings above FUST up to UST / AUST / VUST | Earnings above UST / AUST / VUST |
| A | NIL | 0% | 14.53% | 14.53% | 14.53% |
| B | NIL | 0% | 14.53% | 14.53% | 14.53% |
| C(over state pension age) | NIL | 0% | 14.53% | 14.53% | 14.53% |
| F(Freeport Standard) | NIL | 0% | 0% | 14.53% | 14.53% |
| H(Apprentice under 25) | NIL | 0% | 0% | 0% | 14.53% |
| I(Freeport MWRRE) | NIL | 0% | 0% | 14.53% | 14.53% |
| J(Deferment) | NIL | 0% | 14.53% | 14.53% | 14.53% |
| L(Freeport deferment) | NIL | 0% | 0% | 14.53% | 14.53% |
| M(Under 21) | NIL | 0% | 0% | 0% | 14.53% |
| S(Freeport over pension age) | NIL | 0% | 0% | 14.53% | 14.53% |
| V(Veterans Standard) | NIL | 0% | 0% | 0% | 14.53% |
| Z(Under 21 deferment) | NIL | 0% | 0% | 0% | 14.53% |
For termination awards, an annualised rate will not be used. Instead, the rate of Class 1A NICs is 15.05% if the payment of general earnings or amount (over the threshold of £30,000) is made before 6 November 2022, and the rate of Class 1A NICs is 13.80% if the payment of general earnings or amount (over the threshold over £30,000) is made on or after 6th November 2022.
For sporting testimonial payments an annualised rate will not be used. Instead, the rate of Class 1A NICs is 15.05% if the payment of general earnings or amount (over the threshold of £100,000) is made before 6th November 2022, and the rate of Class 1A NICs is 13.80% if the payment of general earnings or amount (over the threshold over £100,000) is made on or after 6th November 2022.
Tax Changes from April 2023 - Scrapped as of 17th October 2022
The original plan for tax cuts from April 2023 have been scrapped and will not go ahead:
- As of 17th October 2022, the original plan to reduce the basic rate of income tax from 20% to 19% has been scrapped and will not be reduced.
- As of 3rd October 2022, the original plan to abolish the 45% income tax rate on earnings over £150,000 has been scrapped and will not be abolished.
Employer National Insurance Relief for New Investment Zones
Comparable to Veteran and Freeports NIC relief, new investment zones are to be set up and provide employer National Insurance relief to those within the designated areas.
Currently, the government are in discussions with 38 local authorities to establish the investment zones, but eligible employers will benefit from a zero rate employer National Insurance contribution on new employee earnings up to £50,270 per year, as well as other non-payroll related tax benefits.
More information on this will be published when it is made available by HMRC.
IR35 Tax Scheme to be Repealed - Scrapped as of 17th October 2022
IR35 is a tax law that requires the end client, and not the contractors they hire, to decide if the working relationship resembles a self-employed engagement or employment. This means that the end client is liable for the self-employed contractors' tax status and ensuring the correct tax is deducted from pay.
The IR35 tax scheme for off-payroll workers was first introduced to the public sector in 2017 and then to the private sector later in 2021.
As of the 17th October 2022, the original plan for IR35 to be repealed from April 2023 has been scrapped and will not go ahead meaning IR35 rules will remain in place.
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