On 7th September 2021, Boris Johnson announced an increase to National Insurance contributions from April 2022. The structure of this is still being worked on at the moment, but what we do know now is that the impact of the UK wide 1.25% health and social care levy[1] will impact millions of people and all employers from that date.
If you’re an employer, read our quick guide below to find out you might be affected.
How will it impact my business?
If your employees’ earnings are at the level at which you pay National Insurance contributions, your National Insurance contributions will increase (as will your employees’). Whilst your employees will see this in the form of a reduction in take-home pay, your costs will be represented by a larger National Insurance contribution.
Are there any ways to reduce the impact of this?
Yes.
An important point to note here is that if you allow employees to make their pension contributions by salary exchange, which is calculated before Income Tax and National Insurance contributions are calculated, you may be able to save more than you are at the moment.
Currently, employers National Insurance is 13.8%; should an employer use salary exchange, their National Insurance bill could be reduced by £13.80 for every £100 contribution that an employee chooses to make in this way.
We already use salary exchange – are there any ways to increase the saving?
The public reaction to the increase has been significant – we feel that it could be a good time to promote the fact that this is on offer, and invite employees to consider increasing their pension contribution level.
We do not use salary exchange – should we introduce it?
It is certainly worthwhile considering but there are a few things to take into account. Our recommendation would be to put aside some time for a discussion with us so that we can explain in detail how it works, the administrative processes that we can help you follow and the documentation that needs to be complete in order to operate a compliant scheme.
We’re very experienced in implementing salary exchange plans for our clients. With the use of these arrangements saving employers and employees money, we are carrying out this service more and more as it becomes increasingly common.
