In the Government’s mini budget today (22/9/22) the following changes to PAYE and National Insurance were announced;
INCOME TAX REDUCTIONS
The basic rate of income tax will be reduced from 20% to 19% from April 2023. This has been brought forward a year earlier than planned and applies to people who earn between £12,571 to £50,270
An unexpected announcement was the removal of the 45% tax band for people who earn over £150,000 a year. this is seen as a way of simplifying the tax system, although opponents have said that it is a move to benefit only the already wealthy.
NATIONAL INSURANCE REVERSAL
The recent 1.25% national insurance rise will be reversed in November and the Health and Social Care Levy will be scrapped, the Government has announced.
In April, employers’ and employees’ national insurance contributions (NICs) were increased by 1.25% to help fund the growing health and social care bill.
NICs were set to return to 2021-22 levels in April 2023, when the separate 1.25% Health and Social Care Levy was due to be introduced as a separate line on employees’ payslips.
However, today (22 September), the government said it would reduce NICs to their previous level and scrap the levy.
The levy was expected to raise around £13 billion a year to fund the NHS and social care. The government will instead maintain this level of funding via general taxation.
Employees will receive a cut to their NICs in their November pay, but some are likely to receive it in December or January depending on the complexity of their employer’s payroll software.
The government announcement also suggests that employees would be eligible for a NICs “refund”, stating that “individuals should contact their employer for refunds as a first port of call in all circumstances, but there may be circumstances where individuals may need to apply to HMRC for a refund. For example, if their employer is no longer trading, or if an individual has moved roles and their previous employer has confirmed they are unable to issue a refund retrospectively themselves”.
Iain Lock CEO of Q&A HR said ” The Government are setting out their stool to stimulate growth by cutting taxation, however there are fears that whilst on one hand this may give people more money in their pay packet, they may have to pay out more as tax reductions can also lead to inflation, which the Bank of England may look to curb by raising interest rates.
