What does the cut to the rate of NICs and cancellation of Health and Social Care Levy mean?

What does the cut to the rate of National Insurance contributions (NICs) and cancellation of the
April 2023 Health and Social Care Levy mean if I am a Sage User?

On 22nd September 2022 the Chancellor announced in the Governments mini-budget, that from 6th
November 2022 the previously planned 1.25% rise in National Insurance contributions (NIC’s) will
now no longer go ahead and that the plans to introduce the Health and Social Care Levy from April
2023 has now been cancelled.

The key changes are:-

• National Insurance contribution (NIC) rates will be cut by 1.25% for employees, employers
and the self-employed, essentially reversing the uplift which came into effect in April 2022
for the rest of the tax year. This will be effective from 6 November 2022 and it will cover
Class 1 (both employee and employer), Class 1A, Class 1B and Class 4 (self-employed) NICs.

• The Health and Social Care Levy of 1.25% due to be launched from April 2023 will now not
go ahead.
HMRC are notifying companies, so that employers can make the necessary changes to be ready for
November 2022 payroll and have acknowledged that some employers may not be able to implement
the changes in time.

Because of the short notice, employers may need to apply the NIC cuts later in the tax year and
backdate them, if so employees should be made aware as soon as possible.

HMRC have also advised that they will be instructing that employees go to their employers to correct
any overpaid NICs in the first instance. For more information visit HMRC.

What does this mean for Self Employed People?

If you are self-employed or a company director, the changes will be taken into account when you
submit your annual self-assessment return and you will pay a mixed rate of National Insurance.

Do I need to update my Sage Payroll Software?

Employers and software companies have previously been asked to include temporary messages on
payslips for the 2022 to 2023 tax year. From 6th November this will no longer be necessary and
should not be included on future payslips.

If you currently use Sage Payroll software, the rate changes update automatically for you. If you use
other software, HMRC have confirmed that they have made Payroll Software Developers aware of
the changes and have asked them to take the appropriate actions. They have advised that you
should therefore contact your software developer initially with any queries.

If you are a Facebook user and would like some support, why not join one of our Sage Payroll support communities?


“Any advice relating to accounts or tax should be sought from your tax accountant. Sage Accounts Solutions Limited will not be held responsible for any loss or damage caused as a result of the information contained herein.”

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