Autumn Budget 2021 – Employment Issues

National Insurance Contributions (NI)

On 7 September 2021, the Government announced an increase in Class 1 (Employer and Employee) national insurance of 1.25% as a new ‘Social Care Levy’.

The Levy will take effect from April 2022, when National Insurance contributions for working age employees, self-employed people and employers will increase by 1.25%.

From April 2023, once HMRC’s systems are updated, the 1.25% Levy will be formally separated out and will also apply to income from employment or self-employment of individuals working above State Pension age, and National Insurance contribution rates will return to their 2021 to 2022 levels.

So, for 2022-23, employee NI will be 13.25% and employer NI will be 15.05% (increased from 12% and 13.8% respectively).  Self employed (class 4) will be 10.25% (increased from 9%).

The primary and secondary thresholds (at which employees and employers, respectively, start to pay NI) will increase to £190 and £175 per week, respectively.  This means that the lower national insurance threshold for employees (and the self employed) will be £9,880 per annum, and the threshold for employers will be £9,100.

This means that company directors paying themselves the national insurance threshold can have an increase in pay from April 2022 to £758.33 per month (from £736.67).  It may be beneficial for some to increase their pay to £9,880, or even £12,570, depending on their circumstances.

The upper earnings (or profits for the self employed) limit will be £50,270 (£967 per week), aligned with the point at which 40% tax becomes payable.  This has been frozen until 2025-26.

Details of the rates of NI can be found here.

Employer’s Employment Allowance

The employment allowance will remain at £4,000 per annum for 2022-23.

The allowance will continue to be restricted to companies with employer national insurance bills of less than £100,000.

Minimum wage

The Minimum Wage rates from 1 April 2022 will be:

  • 25+ (National Living Wage) – increases from £8.91 to 9.50 per hour
  • 21 to 24 year olds increases from £8.36 to £9.18 per hour
  • 18 to 20 year olds increases from £6.56 to £6.83 per hour
  • 16 to 17 year olds increases from £4.62 to £4.81 per hour
  • apprentices increases from £4.30 to £4.81 per hour

Home working allowance

The maximum flat rate Income Tax deduction available to employees to cover additional household expenses will remain at £6 per week where they work at home under homeworking arrangements from 6 April 2021.

This can usually be paid only when there is a regular pattern of working from home, but under the Covid relaxations, can be paid/claimed for 2020-21 and 2021-22 if there has been even one day of working from home.

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