Primary Threshold Increase 06 July 2022 - Guest Article by Ian Holloway

On 23 March 2022, the UK Government’s Spring Statement announced that the Class 1 Primary Threshold for National Insurance Contributions will increase where the payday is on or after 06 July 2022.  HMRC’s Policy Paper also confirms that the Lower Profits Limit will increase, which has implications for both Class 2 and Class 4 contributions payable by the self-employed.

Employers (who also pay Class 1 Contributions in the payroll) should be aware that no other thresholds are amended in the payroll.  So, the Lower Earnings Limit, the Secondary Threshold and Upper Earnings Limit remain unchanged.  The only change is to the Primary Threshold which is the point at which the employee starts to pay Contributions.

For the current tax year (2022/23), therefore, payroll professionals have two different Primary Thresholds to consider:

Thresholds (paydays 06 April 2022 to 05 July 2022)

	Tax Year	Weekly	Fortnightly	Four-weekly	Monthly	Annual
		£	£	£	£	£
Lower Earnings Limit (LEL)	21/22	120	240	480	520	6,240
	22/23	123	246	492	533	6,396
Primary Threshold (PT)	21/22	184	368	736	797	9,568
	22/23	190	380	760	823	9,880
Secondary Threshold (ST)	21/22	170	340	680	737	8,840
	22/23	175	350	700	758	9,100
Freeport UST (FUST)	21/22	N/A	N/A	N/A	N/A	N/A
	22/23	481	962	1,924	2,083	25,000
Upper Earnings Limit (UEL)	21/22	967	1,934	3,867	4,189	50,270
	22/23	967	1,934	3,867	4,189	50,270

Thresholds (paydays 06 July 2022 to 05 April 2023)

	Tax Year	Weekly	Fortnightly	Four-weekly	Monthly	Annual
		£	£	£	£	£
Lower Earnings Limit (LEL)	21/22	120	240	480	520	6,240
	22/23	123	246	492	533	6,396
Primary Threshold (PT)	21/22	184	368	736	797	9,568
	22/23	242	484	967	1,048	12,570
Secondary Threshold (ST)	21/22	170	340	680	737	8,840
	22/23	175	350	700	758	9,100
Freeport UST (FUST)	21/22	N/A	N/A	N/A	N/A	N/A
	22/23	481	962	1,924	2,083	25,000
Upper Earnings Limit (UEL)	21/22	967	1,934	3,867	4,189	50,270
	22/23	967	1,934	3,867	4,189	50,270

Considerations

There are several considerations for employers:

• Check that your software has been updated, remembering that they apply to paydays on and after 06 July 2022
• Employers that use HMRC’s Basic PAYE Tools need to update to version 22.1 which will be released on 04 July 2022. See HMRC’s June 2022 Employer Bulletin for more information
• Check your software regarding the continued use of any payslip message you may be showing that talks about the ‘1.25% uplift’. The increased Primary Threshold means that some employees will pay less Contributions, perhaps less than in tax year 2021/22.  This makes any payslip message that talks about an uplift redundant
• Be prepared for some employees querying whether less (or no) Contributions will affect their entitlement to a State Pension. I am aware of some reports in the media that say State Pension eligibility in this tax year may be affected because 2022/23 may not count as a ‘Qualifying Year’.  This is incorrect.  As per guidance, a Qualifying Year is one where National Insurance Contributions have been paid or would have been paid if earnings were high enough.  As long as the employee has earnings between the Lower Earnings Limit and the Primary Threshold, the employee is treated as if Contributions had been paid.  So, the increased threshold males no difference at all

 

Ian has been in the payroll profession for over 30 years, processing payrolls from all sectors, large and small. He moved from hands-on exposure in 2011 to become involved in educating the profession. His wide-ranging experience and up-to-date knowledge ensured he was able to impart this information to UK professionals through course material, social media, newsletters and face-to-face presentations.

Today Ian combines both these and is involved with a vital aspect of the payroll environment, that of working with the software that actually does a lot of the hard work for the profession.

Ian approaches education and communication very much from the perspective of how this will impact the software, the employer and the worker. So, whilst the legislation is vital, compliance and effective communication are paramount.

Connect with Ian on LinkedIn.