Cut to the rate of National Insurance contributions (NICs)

Cut to the rate of National Insurance contributions (NICs) and cancellation of the April 2023 Health and Social Care Levy

HMRC have shared the following update.

The government announced yesterday in-year reductions to National Insurance rates and the cancellation of the Health and Social Care Levy as a separate tax. HMRC wanted to let you know these changes at the earliest opportunity so that you can prepare and take the necessary actions. The key changes are:  

•  National Insurance contribution (NIC) rates will be cut by 1.25 percentage points for employees, employers and the self-employed, effectively reversing the uplift introduced in April 2022 for the rest of the tax year. This cut will take effect from 6 November 2022 and it will cover Class 1 (both employee and employer), Class 1A , Class 1B and Class 4 (self-employed) NICs

•  the ring-fenced Health and Social Care Levy of 1.25% due to be introduced from April 2023 will also not go ahead  

HMRC have previously asked employers and software developers to include a temporary generic message on payslips for the tax year (2022 to 2023) to explain the reason for the NICs uplift. This message will not be applicable from 6 November 2022, and it should be removed from payslips with effect from this date.

The full detail on all of these changes will be published by HMRC on GOV.UK in due course, but HMRC wanted to inform businesses as soon as possible, so that you can make the appropriate changes in order to be ready for November 2022 payroll. Please be assured that if you use HMRC Basic PAYE tools this software will be automatically updated to take account of these changes. 

HMRC realise the timeline for this is tight and some employers may not be able to implement the changes in time. HMRC will be directing employees to their employers to correct any overpaid NICs in the first instance.

HMRC have also written to Payroll Software Developers to make them aware of these changes and asked them to take the relevant actions. You should therefore contact your software developer initially with any queries.

Please note that these changes are subject to Parliamentary approval.