Mini Budget 2022: The government has scrapped the temporary 1.25 percentage point increase to national insurance (NI) contributions for the 2022/23 tax year.
Chancellor of the Exchequer Kwasi Kwarteng announced in his Mini Budget speech, that as of 6 November, NI rates will drop to their previous percentage levels. Class One employees who have been paying 15.05% will pay 13.8% from November, and those paying 13.25% will pay 12%.
The increase was originally intended to fund the Health and Social Care Levy, which was due to be brought in from 6 April 2023. The levy was designed to provide additional funding for the NHS and help pay for social care reforms.
Andrew Tully, technical director at Canada Life, said: “This is a hugely significant tax cut from the government today, the largest for more than 40 years. However, within the somewhat distracting package of tax changes and freezing of thresholds and allowances, take home pay for many people will still be lower than last year. That’s before taking into account the significant increases in the cost of living and household bills which we are experiencing.”
Matt McDonald, partner and employment specialist at Shakespeare Martineau, added: “This is unlikely to be a quick and seamless reversal for employers. The extra administrative burden needed to implement change of this nature will put extra pressure on businesses and stretch HR departments. A lag between this announcement and having the appropriate software in place is inevitable, although there is at least a window before the introduction of the change on 6 November.
“More specific details are needed in order for software designers to build tools to help implement and manage the changes and to allow HR professionals to prepare appropriately. With already limited time to do so, businesses should act now to get the correct payroll system in place, to reduce the amount of human input required to roll-out the changes and to limit any administrative and potential financial worries.”