Directors Class 1 NIC (Increase of Thresholds) Act 2022

The rate of Class 1 NICs that applies to a payment of earnings in the 2022 to 2023 tax year to employees depends on the date that the payment is made.

Following the repeal of the Health and Social Care Levy, and the removal of the 1.25 percentage point increase in NIC from 6 November, the rates will be as follows:

·        Main primary percentage- 12.00 %

·        Additional primary percentage – 2.00 %

·        Secondary percentage 13.80 %.

Directors

However, because directors have an annual earnings period, an average blended rate needs to be applied, as set out in the legislation.

The blended rate is calculated as 214 days at the rate which applied at the start of the tax year and 151 days at the rate which applied at the end of the tax year.

·        Main primary percentage- (214 / 365x13.250 (151/65 x 12) = 12.73 %

·        Additional primary percentage – (214 / 365 x 3.25) + (151 / 365 x 2) = 2.73 %

·        Secondary percentage (employer)- (214 / 365X 15.05) + (151 / 365 x 13.80) = 14.53 %

For the whole of the 2022 to 2023 tax year a director’s Primary Threshold is £11,908.

Where a director is paid using the monthly/weekly earning basis then their NICs are worked as if they were an employee, but the blended rates apply to the end-of-year reconciliation.

Where the standard method is used then the blended rates apply for the whole of the tax year.

For the whole of the 2022 to 2023 tax year a director’s Primary Threshold is £11,908.

Employers pay Class1A NIC for taxable benefits they provide to employees. For the 2022/ 2023 tax year the Class 1A National Insurance contributions percentage rate is also 14.53%.