Autumn Budget 2021: what’s changing for payroll?

The 2021 Autumn Budget has just been announced, and there are a couple of changes payroll professionals need to be ready for.

As those managing payroll have been stretched over the past 18 months with the introduction of furlough and the Job Retention Scheme, we’ve created this blog covering the main updates in the Autumn Budget.

1) Health and Social Care Levy

The Government announced the new UK-wide 1.25% Health and Social Care Levy based on NICs earlier this year to help fund investment in healthcare.

From April 2022, the levy will be effectively introduced, increasing NICs by 1.25% for working-age employees, self-employed and employers

The increase will cover Class 1 (employee and employer), Class 1A/1B and Class 4 (self-employed) NICs.

Those above the State Pension age are not impacted by the April 2022 changes.

It’s worth noting that the increase in National Insurance for 2022/23 is a temporary measure and from April 2023, the rate will return to normal.

2) Changes to the National Living Wage

From April 2022 the National Living Wage (NLW) is increasing from £8.91 to £9.50 an hour.

The change forecasts a real-terms pay increase that will help support the living standards of millions of low paid workers, in line with what the Government said is its long-term ambition for the NLW to reach two-thirds of median earnings.

What else is changing for payroll professionals?

Alongside what was mentioned in today’s Autumn Budget, a range of other changes affecting payroll were announced earlier in the year with implications and actions required from April 2022.

National Insurance Holidays for Veterans

Introduced in April 2021, qualifying veterans received a zero rate of secondary Class 1 National Insurance contributions (NICs) on the initial 12 consecutive months after their first civilian employment upon leaving the armed forces.

Since then, employers have been paying the associated Secondary Class 1 NICs as normal, and from April 2022 onwards, they’re able to claim it back and apply for relief in real-time through RTI.

What does National Insurance Holidays for Veterans mean for payroll?

HMRC requests that payroll software be updated for April 2022 to allow the NICs Class 1 secondary veteran category to be applied to the 21/22 tax year in retrospect.

Our IRIS payroll software is always updated with the latest changes to compliance – see our solutions here.

Freeports employer NICs relief

As part of the Government’s work to boost economic activity across the UK, 11 Freeport locations are set to be created.

These Freeports will have different customs rules than the rest of the country and will be innovative hubs, boost global trade, attract inward investment and increase productivity.

What does Freeports employer NICs relief mean for payroll?

In the Spring Budget 2021 the Chancellor committed to providing National Insurance contributions relief for Freeport employers for April 2022.

So, employers who operate and hire within a Freeport's geographic area will receive a zero-secondary rate of employer NICs for employees who earn above the secondary threshold, up to the new Freeport upper secondary threshold.   

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