In the recent Spring Statement, a significant increase in the National Insurance Threshold from £9,880 to £12,570 was announced. This increase will see the alignment of the Primary Threshold (PT) for Class 1 NICs and Lower Profits Limit (LPL) for Class 4 NICs with the personal allowance of £12,570. This change is effective from 6 July 2022.
The changes will come into effect from 6 July to allow payroll software developers and employers to update their software.
The self-employed pay NICs on an annual basis and at the end of the tax year means that the NIC threshold for Class 4 NICs will rise to £11,908 in 2022-23 before being fully in sync with the personal allowance of £12,570 2023-24. The £11,908 figure is calculated using 13 weeks of the NIC threshold allowance at £9,880 and 39 weeks of the threshold at £12,570. It has also been confirmed that the NIC and Income Tax thresholds will remain aligned going forward.
Further, for 2022-23, the point at which the self-employed start paying Class 2 NICs will increase to £11,908. This means that those with profits between the Small Profits Threshold (£6,725) and the LPL (£11,908) will not need to pay Class 2 NICs from April 2022 but will still be able to access entitlement to contributory benefits.
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