Employee National Insurance thresholds set to change from July 2022

** On 23rd September, the Government announced the reversal of planned increases in National Insurance contributions and dividend tax rates which apply to employees, directors, the self-employed and investors. Read more here.**

The important change to the National Insurance contributions (NIC) threshold was announced by Chancellor Rishi Sunak announced as part of his Spring Statement in March.

The move is designed to lessen the impact of the 1.25 percentage point rise in employee NICs from 12% to 13.25% on earnings up to £50,270 per annum. Earnings above this figure now incur NICs of 3.25% instead of 2%.

In fact, the revised NIC threshold in July will remove NICs altogether for some 2.2 million workers nationwide.

At the time of writing, employee income is not subject to employee NICs until they earn £9,880 per annum. This threshold will rise to £12,570, in line with the personal allowance, as of 6th July 2022.

Helen Thornley, technical officer, the Association of Taxation Technicians (ATT), said those earning less than £34,272 per annum will benefit most from the uplifted NIC threshold. The uplift will essentially cancel out the rate rise for most.

“The threshold rise in July is worth more than April’s increased rate in national insurance,” said Thornley.

How much national insurance will employees pay from July 2022?

Between 6th April to 5th July 2022, employees will be able to earn £190 a week (£823 per month) without paying Class 1 NICs.

From 6th July 2022 to 5th April 2023, this weekly threshold will increase to £242 per week (£1,048 per month).

What about directors of limited companies?

Directors in limited companies pay NICs in a different way to employees, on what is known as an annual basis. This means NICs are calculated using their annual earnings rather than from what they earn in each pay period. For 2022-23, a director will be able to earn £11,908 before paying Class 1 NICs. The annual figure differs to employees because this accounts for 13 weeks of £9,880 and 39 weeks of £12,570.

It should also be noted that employers must also pay employer contributions for each employee and more details about the employer contributions which may be due can be found here.

Does the new national insurance threshold affect the self-employed?

The self-employed also pay NICs on an annual basis, for the 2022-23 tax year, they will be able to earn £11,908 before paying Class 4 NICs. 

We can help you make sense of NICs

Whether you’re a small business owner or a busy sole trader, we can help you with your accountancy and tax needs.

As one of the longest tax codes in the world, running a business in the UK and meeting your tax obligations is by no means a walk in the park.

For a free initial consultation on your tax situation call our friendly and experienced team today on 020 3941 2011. Alternatively, you can drop us a line via our online enquiry form to get the ball rolling.

Last updated: 20th March 2024