The majority of employees should receive the NI cut directly via their November payroll!

What is the National Insurance increase reversal?

On 6 April 2022, National Insurance Contributions (NICs) increased by 1.25%. The NICs increase was due to be replaced by the Health and Social Care Levy in April 2023.
The Chancellor of the Exchequer confirmed in September 2022 that the increase will be reversed from 6 November 2022. Additionally, the new Health and Social Care Levy will no longer be introduced in April 2023.
From 6 November 2022 the main and additional rates of Class 1 employee NICs will be reduced by 1.25 percentage points to 12% and 2%. Class 1 employer NICs will also be reduced by 1.25 percentage points to 13.8%.

How will your employees receive the cut?

Depending on your payroll processes, the majority of employees should receive the NI cut directly via their November payroll. Some employees may not benefit immediately from the in-year reduction in NICs rates if you’re unable to update payroll software before 6 November 2022. These employees should receive the benefit retrospectively once updates to the payroll have been applied.
The Government’s policy paper makes clear that the reversal to the National Insurance increase will only apply prospectively from 6 November 2022. However, in case the new reduced rates are not applied to employees’ pay from 6 November 2022 for any reason, UK Government guidance states that, “although individuals should contact their employer for refunds as a first port of call in all circumstances, there may be circumstances where individuals may need to apply to HMRC for a refund. For example, if their employer is no longer trading, or if an individual has moved roles and their previous employer has confirmed they are unable to issue a refund retrospectively themselves”.

Does this change the Employment Allowance?

No. The Employment Allowance, an FSB-designed measure to remove the first £5,000 off every small employer’s NICs bill, will be retained at the same level. This means that small businesses can employ four staff on the living wage without paying any employer NICs.