Class 1 NIC changes
Class 1 NIC changes
There have been several rate changes to National Insurance Contributions (NIC) since April 2022. We have covered these below on a year-by-year basis.
NIC for 2024/25
From 6 April 2024, the main employee rate of National Insurance Contributions was reduced to 8%. The upper rate at 2% and employer rate at 13.8% remain the same.
NIC for 2023/24
From 6 April 2023, the main employee NIC rate was 12% - and from 6 January 2024 it was reduced to 10%. This gives a rate of 11.5% for statutory directors for the year.
The upper rate at 2% and the employer rate of 13.8% remained the same for the year.
NIC for 2022/23
The introduction of the 1.25% increase in both employers’ and employees’ NIC on 6 April 2022 was followed by the increase to the employees’ primary threshold, to bring it in line with the income tax personal allowance (£12,570) on 6 July 2022. These were designed by the previous government as a pre-curser to the introduction of the Health and Social Care Levy (HSCL) from April 2023.
The Government from September 2022 heralded a reversal of the rate increase and repeal of the HSCL - the immediate changes took effect from 6 November 2022.
Where NIC was calculated on a weekly/month period basis both employers and employees paid less NIC on all earnings from 6 November onwards as set out in the table below:
|
Class 1 |
Primary Threshold |
Employee main |
Employee upper |
Employer |
|
6 April to 5 July 2022 |
Weekly £190 Monthly £823 |
13.25% |
3.25% |
15.05% |
|
6 July 2022 to 5 November 2022 |
Weekly £242 Monthly £1,048 |
13.25% |
3.25% |
15.05% |
|
5 November 2022 to 6 April 2023 |
Weekly £242 Monthly £1,048 |
12% |
2% |
13.8% |
|
Statutory directors (Whole year average) |
£11,908 (averaged) |
12.73% |
2.73% |
14.53% |
|
Class 1 A NIC Class 1 B NIC |
|
|
|
14.53% 14.53% |
|
Class 4 NIC (Whole year average) |
£11,908 (averaged) |
9.73% |
2.73% |
|
NIC for Statutory directors
Statutory directors (broadly those recorded as directors of a company at Companies House, e.g., NEDs and the Board) have NIC calculated on an ‘annual earnings period’ for both the director’s and the employer’s contributions.
Class 1A and 1B NIC
Employers also pay Class 1A NIC on any benefits in kind provided, which covers the complete tax year and is remitted by July following the tax year.
For the 2022/23 tax year only a new NIC rate of 14.53% was introduced. This rate should have been used for any Class 1B NICs that apply to PAYE Settlement Agreements.
For 2023/24 onwards the rate that applies is 13.8%.
NIC deferment calculations
For those individuals who need to consider whether they may have exceeded the annual maximum NIC threshold (i.e., those with more than one job who can claim ‘deferment’) NIC rates as shown below will need to be used in the calculations as appropriate:
2022/23 12.73% for employees
2023/24 11.5% for employees
What should employers do?
Businesses considering paying discretionary bonuses might also consider deferring these when reductions in NIC are announced to be more cost-efficient for both employer and employees (although this will make no difference to statutory directors).
It has always been appropriate to identify statutory directors in regular payrolls, so checking that recently appointed directors and NEDs are recorded correctly is good practice.
If you have questions or need advice on your business' NIC position, get in touch with our expert team, who will be happy to help.