Small Business Owners can now pay more as National Insurance thresholds change effective from 6 July 2022
Small Business Owners can now pay more as National Insurance thresholds change effective from 6 July 2022
As off the 6th July this year there has been an increase to both the primary threshold (PT) and lower profits limit was confirmed from £9,880 to £12,570.
This change aligns the rate with the income tax personal allowance and will mean that many small business owners will now be able to pay themselves more without having an increased NI burden.
The HMRC NI Calculator provides the ability to view the period gross pay and results of the employee and employer NIC due.
Primary (PT) (Employee contribution threshold and rates)
Secondary (ST) (Employer contribution threshold and rates)
The National Insurance Primary thresholds for tax year 2022/2023 are as follows:-
Effective from 6 July 2022
| Weekly | £242 |
| Monthly | £1,048 |
| Annual (Directors’) | £11,908 |
6 April 2022 to 5 July 2022 (Pre NI change)
| Weekly | £190 |
| Monthly | £823 |
| Annual | £9,880 |
HMRC require that National Insurance (NI) is calculated period by period rather than as a year to date basis. This means the NI amounts calculated using the new rates are not affected by any NI calculated prior to 6 July 2022.
Directors
The new NI thresholds are applied differently for Directors.
Pro-rata (Table) – This method of calculation will use the new Primary Threshold each period from 6 July onwards. At end of the tax year or if the director leaves, there will be a re-calculation using the new Director Primary Threshold.
Annual (Non-Table) – The new Director Primary Threshold may cause a re-calculation of NI-liability if the director has already exceeded the original Primary Threshold, as the annual calculation will use the new Director Primary Threshold.
The HMRC Link provides guidance on the rate and thresholds effective from 6 July 2022
Here is an example of the difference the change will make.
| AFTER 6 July 2022 | BEFORE 6 July 2022 | |||||||||
| Annual | Monthly | Annual | Monthly | |||||||
| Annual Salary | £12,000.00 | £1,000.00 | £12,000.00 | £1,000.00 | ||||||
| Earnings at (LEL) Lower Earnings Limit | Employee Contributions | LEL | £533.00 | £533.00 | ||||||
| Earnings above (LEL) Lower Earnings Limit up to and including (PT) Primary Threshold | Employee Contributions | PT | £467.00 | £290.00 | ||||||
| Earnings above (PT) Primary Threshold up to and including the (UEL) Upper Earnings Limit | Employee Contributions | UEL | £0.00 | £177.00 | ||||||
| Employer National Insurance due | £36.42 | £36.42 | ||||||||
| Employee National Insurance due | £0.00 | £23.45 | ||||||||
| Total National Insurance contibutions payable to HMRC | £36.42 | £59.87 | ||||||||
To find out how this will affect you and your business contacts us and speak to one of our Tax Advisors.