HMRC has urged businesses to update their payroll software systems as soon as possible, ahead of the cut to
National Insurance tax in November. National Insurance Contributions (NICs) were increased 1.25 per cent in April, but this decision was reversed as part of new Chancellor Kwasi Kwarteng’s mini-budget last week.
The cut to NICs will come into effect from November 6 2022 for self-employed workers, employees and employers. In order to ensure workers do not pay higher than necessary NICs after the changes come in, HMRC has warned businesses to move quickly to ensure their payroll systems are up to date.
HMRC said in its communication to businesses: “We realise the timeline for this is tight and some employers may not be able to implement the changes in time. HMRC will be directing employees to their employers to correct any overpaid NICs (National Insurance Contributions) in the first instance.”
HMRC has also told businesses that utilise its HMRC Basic PAYE tools that this will be automatically updated in accordance with the cut to NICs but said that businesses using alternative systems for their payroll will need to ensure providers act on the change.
HMRC said: “We have also written to payroll software developers to make them aware of these changes and asked them to take the relevant actions. You should, therefore, contact your software development initially with any queries.”
The April 2022 NIC hike, introduced by former Chancellor Rishi Sunak, was criticised by many in the contracting industry for the impact that it would have on the income of the UK’s self-employed workforce. The reversal, which came alongside the announcement that IR35 reforms would be repealed, has been widely welcomed by the self-employed sector.
Andy Chamberlain, Director of Policy at the Association of Independent Professionals and the Self-Employed (IPSE), commented: “Ever since this measure was announced by the former Prime Minister, we’ve been calling for it to be scrapped.”
“The increase to National Insurance will have affected anyone who works, but those who work via an umbrella company – often against their wishes – have been doubly impacted, because they are unfairly forced to shoulder the burden of not just employee NI, but employer NI too.”
Chamberlain added: “We are delighted that the chancellor has taken the sensible decision to reverse this unfair tax rise.”
