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NICs (Increase of Thresholds) Act 2022

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The National Insurance Contributions (Increase of Thresholds) Act 2022 received Royal Assent on 31 March 2022 and realises the UK government’s policy of aligning the NICs thresholds with the income tax personal allowance (£12,570).

Section 1 increases the primary threshold for class 1 contributions with effect from 6 July 2022 and confirms that the increases ‘do not affect any liability to primary Class 1 contributions for any tax week commencing before that date’. The thresholds for 2022/23 are set out as follows in HMRC’s Rates and thresholds tables for employers publication:

6 April 2022 to 5 July 2022

  • £190 per week;
  • £823 per month; and
  • £9,880 per year.

6 July 2022 to 5 April 2023

  • £242 per week;
  • £1,048 per month; and
  • £12,570 per year

The lower profits limit (LPL) for class 4 contributions is increased to £11,908 (up from £9,880) with effect for the tax year 2022/23. This mirrors the annualised effect of the increase in the class 1 primary threshold to £12,570 with effect from 6 July (i.e. taking effect part-way through the 2022/23 tax year). Section 2 confirms that, with effect from 6 April 2023, the LPL will rise to £12,570 – fully aligning with the income tax personal allowance.

Section 3 sets out two regulation-making powers in relation to class 2 contributions:

  • the Treasury is required to align the point at which class 2 contributions become payable with the LPL, meaning that individuals whose profits fall below the LPL will not pay class 2 contributions; and
  • the Treasury is empowered to provide that individuals whose profits fall between the class 2 small profits threshold and the LPL are treated as making class 2 contributions.

Section 4 updates the primary threshold figure used in the NICs annual maxima calculation for class 1 contributions (which applies where an individual has more than one employment in the tax year). The revised amount for 2022/23 is set at £229 which is the weekly equivalent of £11,908.

The annual maxima calculations have also recently been updated to reflect the 1.25 percentage point increase in the rates of class 1 and 4 contributions for 2022/23 (see SI 2022/300).

Issue: 1571
Categories: News