How the National Insurance Contributions changes affect your practice
How the National Insurance Contributions changes affect your practice
In the 2023 Autumn Statement the chancellor announced a reduction in the main rates of National Insurance Contributions (NIC), these changes impact practice employees and self-employed GPs.
For employees the change is effective from 6 January 2023. The current rate paid by employees earning between £12,570 and £50,270 is 12%. For an employee earning over £50,270 this will result in a reduced monthly NIC cost of approx. £60 which will be reflected in their monthly net pay. The NIC rate payable on earnings over £50,270 remains at 2%.
There is no reduction in the cost of employment for employers, the rate of employers NIC is unchanged at 13.8% on earnings above £758 per month. Class 1A and 1B national insurance is payable by employers on expenses and benefits provided to their employees, there are no changes to this rate which remains at 13.8%.
Businesses running their payroll internally will need to ensure their software has been updated to reflect these changes, this may involve action employers need to take to update their payroll software. If businesses outsource their payroll, a check that these changes are reflected in their staff payroll is advised.
HMRC have confirmed there may be a minority of employers that do not amend their payroll system in time for employees to see the benefit in their January payslip. These employers will rectify this in in subsequent months and employees will receive the full benefit of the NIC cut.
GPs who operate their private practice through a company should note that the rate of NIC for statutory directors pay will be averaged at 11.5% for 2023/24 and reduce to 10% for 2024/25.
Despite the additional administrative burden for employers, most will welcome the fact that their staff will receive more take home pay that they do not need to fund from practice income.
Self-employed individuals pay Class 2 and Class 4 NIC. Changes to these types of NIC do not come into effect until 6 April 2024. The chancellor announced Class 2 NIC will be abolished from 6 April 2024. Class 2 is currently a weekly cost of £3.45 where earnings exceed £12,570. This reduces the annual NIC liability by £179.40 for 2024/25 and future years. The self-employed will still receive access to contributory benefits including state pension. The ability to pay voluntary Class 2 NIC will continue for self-employed individuals earning below £6,725 a year.
The current rate of Class 4 NIC is 9%: this reduces to 8% from 6 April 2024. Class 4 NIC is due on earnings between £12,570 and £50,270. The contribution rate for earnings over £50,270 remains at 2%. For a self-employed individual earning in excess of £50,270 the reduction in their annual NIC liability from 6 April 2024 will be £377. This total reduction in National Insurance including the abolished Class 2 National Insurance totals just over £550.
For help and advice on any payroll or other tax issue, please get in touch with our team.
For more information please contact: Juliette Smith or Aimee Winterbone.
For employees the change is effective from 6 January 2023. The current rate paid by employees earning between £12,570 and £50,270 is 12%. For an employee earning over £50,270 this will result in a reduced monthly NIC cost of approx. £60 which will be reflected in their monthly net pay. The NIC rate payable on earnings over £50,270 remains at 2%.
There is no reduction in the cost of employment for employers, the rate of employers NIC is unchanged at 13.8% on earnings above £758 per month. Class 1A and 1B national insurance is payable by employers on expenses and benefits provided to their employees, there are no changes to this rate which remains at 13.8%.
Businesses running their payroll internally will need to ensure their software has been updated to reflect these changes, this may involve action employers need to take to update their payroll software. If businesses outsource their payroll, a check that these changes are reflected in their staff payroll is advised.
HMRC have confirmed there may be a minority of employers that do not amend their payroll system in time for employees to see the benefit in their January payslip. These employers will rectify this in in subsequent months and employees will receive the full benefit of the NIC cut.
GPs who operate their private practice through a company should note that the rate of NIC for statutory directors pay will be averaged at 11.5% for 2023/24 and reduce to 10% for 2024/25.
Despite the additional administrative burden for employers, most will welcome the fact that their staff will receive more take home pay that they do not need to fund from practice income.
Self-employed individuals pay Class 2 and Class 4 NIC. Changes to these types of NIC do not come into effect until 6 April 2024. The chancellor announced Class 2 NIC will be abolished from 6 April 2024. Class 2 is currently a weekly cost of £3.45 where earnings exceed £12,570. This reduces the annual NIC liability by £179.40 for 2024/25 and future years. The self-employed will still receive access to contributory benefits including state pension. The ability to pay voluntary Class 2 NIC will continue for self-employed individuals earning below £6,725 a year.
The current rate of Class 4 NIC is 9%: this reduces to 8% from 6 April 2024. Class 4 NIC is due on earnings between £12,570 and £50,270. The contribution rate for earnings over £50,270 remains at 2%. For a self-employed individual earning in excess of £50,270 the reduction in their annual NIC liability from 6 April 2024 will be £377. This total reduction in National Insurance including the abolished Class 2 National Insurance totals just over £550.
For help and advice on any payroll or other tax issue, please get in touch with our team.
For more information please contact: Juliette Smith or Aimee Winterbone.