The Chancellor, Kwasi Kwarteng, announced prior to his mini-budget in September 2022 that the rise in National Insurance Contributions (NICs) rate of 1.25% which was introduced on 6 April 2022, will be reversed from 6 November 2022. The decision to reverse the increase is part of a package of measures aimed at reducing tax rises introduced by the government in recent years.
- Adjustments to the NICs rate will be made via the employer's payrolls.
- From 6 November 2022, the previous 2021-22 NICs rates of 12% and 2% will apply, with an employer's rate of 13.8%.
- It is anticipated that larger employers may need more time to adjust some of their systems.
- Directors will pay a hybrid rate for the year when their pay is calculated on the usual annual earnings method: this works out at 12.73% below the Upper Earnings Limit (UEL) and 2.7% above the UEL with an employer's rate of 14.53%
- Most employees will not need to do anything to receive the benefits of the cut.
When an employer has not been able to process the cut in time and the employee leaves that employment, there may be circumstances where individuals may need to apply to HMRC for a refund. For example, if their employer is no longer trading, or if an individual has moved roles and their previous employer has confirmed they cannot issue a refund retrospectively themselves.
Hybrid rates of 14.53% will also apply for the 2022-23 tax year to:
- Class 1A NICs on Benefits In Kind.
- Class 1B NICs on PAYE settlement agreements.
The announced reductions will also apply to Class 4 NICs payable by the self-employed.
- Hybrid rates of Class 4 NICs 9.73% and 2.73% will apply for the 2022-23 tax year.
There are no changes to the increased NICs thresholds that were introduced in July 2022.
Further announcements will be made on Friday 23 September confirming a reversal in the rise in the Dividend rate from April 2023.
Useful guides on this topic
National Insurance: Rates
What are the current National Insurance rates? What rates will apply to next year? What is the Health and Social Care Levy? Who will the levy apply to?
Employers' NICs allowance
The Employers' National Insurance Contributions (NICs) allowance is an allowance given to small and medium-sized employers to offset against their annual Employers' National Insurance liabilities.
Mini-budget 2022: at a glance
A summary for SMEs and their owners.
External links
HM Treasury: National Insurance increase reversed
The Growth Plan 2022: Cancellation of National Insurance rise and Health and Social Care Levy
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