Spring Statement 2022 – Changes to PAYE

National Insurance changes announced in the spring statement

The Chancellor of the Exchequer delivered his spring statement to parliament on 23rd March 2022. In this article, we have compiled the key changes which will impact PAYE.

A key highlight of Rishi Sunak’s spring statement was the announcement that the government would increase both the Primary Threshold and Lower Profits Limit of National Insurance from 6th July 2022.

Sunak confirmed that the National Insurance threshold (the amount you can earn without paying National Insurance) will increase from £9,600 to £12,570. The lower earnings limit will increase by £3,000, bringing it in line with the income tax threshold. This means that you will not pay NICs unless your income exceeds £12,570 – up from £9,568 in 2021-2022

Employment Allowance increase from 6^th April 2022

As part of the Chancellor’s spring statement initiatives, Rishi Sunak announced an increase in the Employment Allowance from £4,000 to £5,000. Employment Allowance is a relief which allows eligible businesses to reduce their employer National Insurance contributions (NICs) bills each year.

The result is that they will pay less employers’ Class 1 national insurance each time they run their payroll until the £5,000 has been used or the tax year has ended.

Approximately 495,000 businesses (30% of all businesses) will benefit from this increase, including 50,000 businesses (3% of all businesses) that will stop paying National Insurance Contributions and Health and Social Care Levy.

The government states that: “You can claim employment allowance if you’re a business or charity (including community amateur sports clubs) and your employers’ Class 1 national insurance liabilities were less than £100,000 in the previous tax year.

Also, the government states: “You can also claim if you employ a care or support worker.”

Find out how to file a claim here.

Income Tax to be cut by 2024

In addition to introducing a new National Insurance threshold, Rishi Sunak has announced plans to lower income tax rates from 20% to 19% before the end of parliament session in 2024. This is the first cut in 16 years and will affect more than 30 million workers on average.

The government has also detailed that it wants to make the tax system more transparent, fair, and efficient, and it plans to unveil its plans for changes to reliefs and allowances ahead of 2024.

For further information about key changes being introduced into the 2022/2023 Qtac software, as well as the steps you need to take to stay on top of payroll year-end read our ‘Payroll year-end 2021/2022′ article.