The UK Government as part of the Autumn Statement 2022 on 17th November 2022 announced the freezing of standard National Insurance values at current levels from 6th April 2023 and the alignment of earnings thresholds for employee and directors. The blended Director rates applicable from 6th November 2022 are now aligned with the standard employee rates.

This results in changes to contributions for:

  • Directors
  • Class 1A on termination and sporting testimonials

Class 1 earnings bands 6th April 2023 – Employee and directors

The thresholds and limits are indicated as being frozen for April 2023 with the secondary threshold being frozen until April 2028. Adjustment is required in relation to the Directors Primary Threhold (Prior year 2022/2023 values will be shown in brackets where different):

*Please note that due to different rounding rules in relation to Tax law versus NI law, the PT/ST/FUST/AUST/UST/VUST/UEL for 2/4 weekly is not necessarily a multiple of the weekly value. However, and for this tax year, the LEL, PT, ST, FUST are coincidently multiples of the weekly values. The UST, AUST, VUST and UEL continue to not be multiples for 4 weekly pay periods.

 

National Insurance Contribution Rates 6th April 2023 – Employees and Directors

These are to be used for payments from 6th April 2023 for employee’s director calculations. These are now to be used for payments for Director annual method (old rates shown in brackets), and Directors alternate method for the final payment at leaving or the last tax period of the year where contributions are to revert to the annual method.

And for Mariner related National Insurance Contributions:

For guidance and information on the operation of National Insurance within the SD Worx pay solution see:

Class 1A on Termination Payments and Sporting Testimonial

For termination payments an employer may require configuration of 3 separate pay elements:

  • Pay Element subject to both Tax and National Insurance (such as Pay In Lieu of Notice or an amount identified by a PENP calculation)
  • Pay Element that is free of Tax and NI for the payment of tax free redundancy up to £30,000 limit
  • Pay Element that is above the allowed tax free amount which is subject to Tax and Class 1A employer National Insurance in real time

Ensure that the Class 1A liability on pay elements marked as being Class 1A for termination payments and sporting testimonials apply the employer contributions rates used for employees based at the point of payment (contractual or fiscal payment date). Payments from 6th April 2023 at 13.8%

 2022/20232023/2024
Class 1A Termination and Sporting Testimonials15.05% (until 5th November 2022) 13.8% (from 6th November 202213.8%

When processing these payments within the payroll operations, an employer is required to undertake the relevant PENP calculation which aids identify the payments value in relation to:

  • Amounts subject to Tax and Class 1 National Insurance
  • Amounts that are free from Tax and Class 1 National Insurance
  • Amounts that are subject to Tax and Class 1A employer only National Insurance

Class 1A and Class 1B annual liabilities

Please note that the NIC rate for benefit-based Class 1A and PSA Class 1B will no longer use a blended rate and revert to 13.8%.

 2022/20232023/2024
Class 1A Benefits in Kind (BIK)14.53%13.8%
Class 1B PAYE Settlement Arrangements (PSA)14.53%13.8%

Class 1A on Benefits In Kind and Class 1B for PAYE Settlement Agreement (PSA) do not form part of payroll calculations, but are required to be assessed annually and reported to HMRC separately.

Although an employer may attempt to simulate a Class 1A or Class 1B notional amount as an employee level notional calculation, this would not align with the annual statutory calculation and will not match exactly due to differences in the use of the employer total amounts across the fully year and different rounding points. This may assist an employer in determining a rough liability amount, however, the actual annual statutory calculation which is external to the payroll calculation will be different.

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