The Government has confirmed that the 1.25 point increase on the NI rate will be scrapped from 6th November 22 as part of a package of tax cuts designed to create growth in the economy. It has also been confirmed that the related Social Care Levy, due to come into force 6th April 2023 has also been scrapped. The Government has pledged to protect the level of funding as if the levy, which was anticipated to raise around £13Bn per year, were still in place.
The change means that payments due on or after the 6th November the rates will revert to 12.5% for employees and 13.8% for employers. Previous contributions will not be adjusted and there will not be any rebates for contributions made at the higher rate. The position on annually calculated directors NI rate has yet to be confirmed, although it is anticipated there will be a blended rate for the year as there was when the initial increase came into effect. The reduction in the NI rate is expected to save employees, on average, around £135 this year and £330 next year and save businesses an average of £10,000.
The NI thresholds, which had been raised in line with the tax thresholds to keep the poorest people from being adversely affected by the levy, remain unchanged.
This cut comes as part of a swathe of measures designed to stimulate economic growth announced in a “mini statement” on 23rd September 2022.