The following has been provided by the HMRC Software Developer Support Team (SDST):-
On 22 September the Government announced changes to National Insurance contributions (NICs) rates and the Health and Social Care Levy (HSCL). Please note that this update is subject to Parliamentary approval.
Key measures the Government announcement impacting payroll software developers include:
- New rates of NICs from 6 November. This covers Class 1 (employer and employee NICs), Class 1A, Class 1B and Class 4 (self-employed) NICs.
- HSCL of 1.25%, due to be introduced from April 2023, will now not go ahead.
Detail on NICs changes:
- A new rate of Class 1 NICs for both employers and employees for earnings paid on or after 6 November for the remainder of the 2022-23 tax year
- The rate of Class 1A (excluding sporting testimonials and termination payments reported on an RTI return) and Class 1B will be a revised annualised rate for the 2022-23 tax year.
- The rate of Class 1A for sporting testimonials and termination payments reported on an RTI return is the rate that applies at the time of the payment of the general earnings or amount.
- For those self-employed individuals who pay NICs through the annual Self-Assessment process, a revised annualised rate will be payable on income reported for the 2022-23 tax year. The return for this is due by 31 January 2024 and calculations will be made by the Self-Assessment system.
- A revised annualised Class 1 NICs rate will also apply for directors to ensure consistency and fairness with in-year changes to other rates of NICs.
- We have previously asked software developers and employers to include a temporary generic message on payslips for the tax year 2022-2023 to explain the reason for the NICs uplift. This message will not be applicable from 6 November 2022 and action should be taken to remove it from payslips.
- We realise the timeline for this is tight and it is possible that some employers will not be able to deduct the correct NICs rates from 6 November. HMRC will be directing employees to their employers to correct any overpaid NICs in the first instance.
- We will also be writing to employers and agents on our database to make them aware of these changes, but we would appreciate any assistance you can provide in informing your clients and updating your support models with this information.
Detail on 2023-24 changes
Following the cancellation of the HSCL we will be delivering technical documentation to reflect this as part of the 2023-24 RTI Technical pack.
We expect to provide the technical pack in early November 2022, followed by LTS and TPVS test services in early to mid-November.
We appreciate that this is later than usual, however as the HSCL data items are now not going to be introduced, this is solely a year-on-year change from 2022-23.
Further information and guidance on these changes will be published on GOV.UK in due course.
Please find attached an updated EB5 document showing the NICs calculations to apply from 6 November, along with a table of the Class 1 rates and thresholds. We will provide a sample of payroll test data examples shortly.