10th September 2021
Payroll to save the day once again!
As we come to the end of National Payroll Week, and celebrate everything payroll has done to keep the UK paid during a global pandemic, now that the furlough scheme approaches its final days, it is perhaps fitting that this week’s announcement introducing the Health and Social Care Levy places payroll at centre stage once again.
So what do we know so far?
It isn’t possible for the government to develop the infrastructure for collecting the levy in six months, so to enable the government to begin collecting the additional revenue as soon as possible, from next April National Insurance contribution rates will temporarily rise by 1.25%.
For employees on the standard category A, Class 1 NICs will be paid at a rate of 13.25% on earnings above the Primary Threshold (PT) up to the Upper Earnings Limit (UEL). The percentage applied above the UEL will increase to 3.25% from the current 2%. Employees above State Pension age who do not currently pay NICs will not be affected by this increase.
For employers, the same Category A Class 1 NICs will increase to 15.05% on earnings above the Secondary Threshold (ST). This rate also applies to Class 1A and 1B NICs.
From April 2023, NIC rates will return to their previous level and the separate Health and Social Care Levy will come into effect as a formal legal surcharge of 1.25% of earnings which will also apply to individuals working above State Pension age, who are not liable to pay NICs on their earnings at present.
The levy contribution must be shown as a separate entry on payslips, and a generic message could appear on payslips in the next tax year.
Any more complications?
Existing NICs reliefs to support employers will apply to the Levy. Companies employing apprentices under the age of 25, all people under the age of 21, veterans and employers in Freeports will not pay the Levy for these employees as long as their yearly gross earnings are less than £50,270, or £25,000 for new Freeport employees.
And further good news for employers, though not necessarily for the payroll teams who need to perform the calculations, the Employment Allowance, which discounts the smallest businesses’ employer NICs bills by up to £4,000, will also apply to the Levy. This means that around 40% or around 640,000 businesses, will not be affected at all by the Levy. It is expected that 70% of the money raised from businesses will come from the largest 1% – those with at least 250 employees.
And there we have it. Yet again, the efficiency and professionalism of payroll practitioners the length and breadth of the UK will be relied upon to collect the extra revenue the country needs to rescue health and social care.
Payroll where would the country be without you?