How to benefit from the National Insurance changes

Since the Spring statement was announced back in March, we’ve been busy unpicking it to make sure our clients are maximising any potential savings.

There were two mentions of National insurance which you may recall from our overview of the statement.

  • The Employment Allowance is set to rise to £5,000 per year from April, reducing the employers National Insurance paid by many businesses;
    A great news story for all business currently benefitting from the employment allowance.

  • The National Insurance threshold will be raised by £3,000 to £12,570 in July, leading to an additional £330 in the pockets of those earning over the personal allowance.
    The secondary threshold for national insurance, from which employers national insurance is calculated, will increase by £5 per week to £9,100 per annum for the 2022/23 tax year. The bullet point above only benefits employees net pay rather than the company.
    This tax year for director only payrolls, ordinarily the salary figure suggested would be £758 per month.

What new strategy do we suggest?

You can now increase your monthly director salary to £992 and in turn will not incur any employee national insurance, your company would then only pay a small amount of £442 in employers national insurance per annum.

How does this impact my Corporation Tax?

A higher salary will reduce company profits and hence the corporation tax payable. Assuming corporation tax is payable the reduction in corporation tax will be more than the employers NI paid. Delivering an overall benefit to the company.

Even if employers NI is paid there should be a tax benefit of £240 per year, increasing further if the company is eligible to claim the employment allowance.