In future years, this will be a welcome simplification as it means that employees will start paying NICs and income tax at the same point. However, for 2022/23 employers must deal with the complication of two different primary thresholds – an annual equivalent of £9,880 for the first three months from 6 April 2022 to 5 July 2022 and an annual equivalent of £12,570 from 6 Jul 2022 for the rest of the 2022/23 tax year. The Chancellor was not able to bring both the rate increase and threshold increase in at the same time as the threshold increase was announced so close to the start of the tax year that there was not enough time for HMRC and software providers to update their systems.

Fortunately, in practice, most employers should find that their software will handle the complexities and it is expected that most software will now be updated for the changes. If you are not sure, it is worth checking with your software provider.

HMRC advises that employers who use the Basic PAYE tools must wait until 4 July 2022 before running any payrolls covering payments made on or after 6 July 2022.

As a general rule, as a result of the changes all employees should see a reduction in their NIC bill in their July pay packet compared to the previous month, and thus an increase in their take home pay. The cumulative effect of the changes is that by the end of the 2022/23 tax year anyone earning under £34,500 will have paid less NIC than they did in 2021/22 thanks to the threshold increase. For anyone earning over £34,500 the increase in the NIC rate will more than offset the savings from the threshold increase and they will find themselves paying more NIC overall compared to last year.