Employers NI calculator & guide 2022/23

Updated: 3 days ago

UPDATE: The government has decided to reverse the NI increase that came into effect in July this year. As of November 6, 2022, the National Insurance rates will revert to the previous levels, while National Insurance thresholds remain the same.


To see the impact on NI contributions that employers pay for staff and that employees get deducted from their pay, use the below NI calculator.


National Insurance Calculator


 


Download a free excel version of this NI calculator




 


Overview of National Insurance changes in 2022/23


As we outlined in our blog ‘What you need to know about the National Insurance Rise 2022’, there have been several changes to NI contributions in 2022/23.


Briefly, from 6 April 2022, contributions increased for both employees and employers by 1.25%, and so did the contribution thresholds, the "tax-free" amount you can receive before contributing to NI. The thresholds increased in April and then again - but just for employees - in July, to £12,570 annually.


The Health & Social Care levy which was supposed to be introduced in in the 2023/24 year has been scrapped.


How is National Insurance calculated?


This guide walks you through the fundamentals of the employer National Insurance calculation for the latest NI rates and thresholds for 2022/23 and our employer NI calculator takes the stress out of working out your contributions for this year.


In this section, we’ll go over the rules behind the National Insurance contributions calculation, what factors play into it, how contributions have changed in 2022/23 and how they differ between employees and employers. In particular, this article looks at

  • National Insurance categories

  • National Insurance rates

  • National Insurance thresholds

  • National Insurance increase in 2022/23

  • National Insurance threshold calculator


The National Insurance category


In order to calculate NI deductions correctly, you need to assign an employee the correct National Insurance category.


There are 8 broad employee National Insurance categories, which are dependent on personal factors such as age, marital status and employment history such as having another job, being an apprentice or a veteran.


Most employees in the UK as of tax year 2022/23 have NI code A, which is the default National Insurance category and applied to anyone who does not fall into any of the other NI categories listed in the below NI category letter table for 2022/23.


This table lists the NI categories for 2022:

NI Category

Employee Group

A

Category A covers all employees except those in categories B, C, H, J, M, V and Z. Most employees fall under category A

B

Married and widowed women who are eligible for reduced NI contributions

C

Employees who are over the State Pension age

H

Apprentices under the age of 25

J

Employees who are paying their NI contributions through another job

M

Employees under the age of 21

V

Army Veterans in their first employment

Z

Employees under the age of 21 who are also paying their NI contributions through another job

Source: https://www.gov.uk/national-insurance-rates-letters/category-letters


Note that the National Insurance number (NINO) has nothing to do with the NI category, as its a random identifier for HMRC for a tax person in the UK, which never changes, while the NI category of a person may change over time.



How to calculate employers National Insurance contributions (NI Class 1)


Calculating employers National Insurance is straightforward: employers pay 0% on income below a certain threshold and 13.8% above that threshold. Use this NI calculation UK formula:

 

Employers NI = National Insurance rate x Income above NI threshold

 

For the most common NI classes (A, B, C and J) this threshold is the Secondary Threshold, which is subject to the National Insurance increase this tax year. For certain young employees (H, M) and veterans (V) the income threshold is the much higher Upper Earnings Limit.


Employers National Insurance rates


Use this table to determine employer National Insurance rates for 2022/23 UK (effective from 6 April 2022). Multiply any earnings above the threshold by the National Insurance rate, shown in the table below, to get the employer National Insurance you need to pay for an employee.

NI category

National Insurance rate

below threshold

National Insurance rate

above threshold

A, B, C, J, H, M, V

(most employees)

0%

13.8%

National Insurance threshold


Use this table to determine National Insurance thresholds 2022/23 (effective from 6 November 2022). Income above these thresholds is subject to employers NI contributions at the NI rate determined above.

NI category

NI Threshold

(monthly income)

NI Threshold

(weekly income)

A, B, C, J

(most employees)

£758

£175

F, I, L, S

£2,083

£481

H, M, V, Z

(youngsters, veterans)

£4,189

£967


Employers NI calculator 2022/23 (table)


Below you can see monthly employer and employee NI contributions for salaries ranging between £20,000 and £80,000 per year, applied for NI category letters A, B, C and J. These are taking into account the latest NI rates and income thresholds effective from 6 November 2022 onwards.

​Annual Salary

Monthly Employer NI

(13.8%)

Monthly Employee NI

(12% + 2%)

£20,000

£125

£74

£25,000

£183

£124

£30,000

£240

£174

£35,000

£298

£224

£40,000

£355

£274

£45,000

£413

£324

£50,0000

£470

£374

£55,000

£528

£384

£60,000

£585

£393

£65,000

£643

£401

£70,000

£700

£409

£75,000

£758

£418

£80,000

£815

£426

National Insurance Credits


Employers which had less than £100,000 in employers NI in the past tax year have an annual employment allowance of £5,000 in the 2022/23 tax year, which can be deducted from employers NI when paying HMRC. These National Insurance credits, renew every tax year, as long as you stay below the total NI threshold, subject to change.


National Insurance credits were increased up in tax year 2022/23 to £5,000 compared to just £4,000 in the year prior.



Employee benefits and in some cases expenses are also subject to National Insurance


So far so good. But there are a few more things you need to take into considerations in order to account for other income subject to National Insurance, such as benefits and some expenses. There are also more things to considers for directors and PAYE settlement agreements.


Employers Class 1A NI contributions on employee expenses and benefits


National Insurance is also payable on any employee benefits or expenses. Employers must report and pay this particular NI liability at the end of the tax year.


You must pay NI on benefits such as work phones, accommodation, and bonuses. Note that every expense and benefit is calculated differently, so you need to check on what you’re required to report and pay.


You will need to complete a P11D form for every employee that you have given benefits or expenses to and return it to HMRC. It is possible to deduct and pay class 1A NI through your payroll as long as you remember to register with HMRC before the beginning of the tax year.


NI Contributions for Directors of Limited Companies


Company directors count as employees and therefore are required to pay NI contributions on any income over £9,880. Your NI liability is calculated from annual earnings but is paid in accordance with your payroll schedule.


Even if you’re the only employee of your company and you’re the director, your company will still need to pay employers NI on your salary.


Class 1B NI - PAYE Settlement Agreement (PSA)


A PSA allows employers to make a single payment per year that covers any tax and National Insurance contributions that are due on ‘minor, irregular or impracticable’ employee expenses or benefits. These are known as Class 1B National Insurance contributions. Benefits that are covered include long service incentives, telephone bills, relocation expenses, and shared cars.


2023 & The Social Care and Health Levy


Looking ahead, employers need to ensure their payroll software will automatically reflect the introduction of the new Social Care and Health Levy in April 2023. Your payslips will need to include the levy as a separate item. In addition, the levy will also be paid by employees that are over the State Pension age.



How much do I deduct from employee pay for National Insurance contributions (NI Class 1)?


As an employer, you are responsible for automatically deducting your employees’ NI contributions from their pay as part of NI Class 1 contributions. Most employees are on NI code A which has a free income threshold of £1,048 and NI rates A consisting of

 

13.25% for income between £1,048 and £4,189 per month

3.25% on income above £4,189

 

The new NI rates and thresholds for 22/23 are reflected in the NI category letter table below.

Category Letter

up to £1,048

£1,048 to £4,189

Over £4,189

A, F, H, M, V

(most employees)

0%

12%

2%

B, I

0%

5.85%

2%

J, L, Z

0%

2%

2%


Final Thoughts


Once you wrap your head around it, the National Insurance hike, though costly, is straightforward. That being said, with the income thresholds having changed several times in a short period of time, a robust payroll process is necessary.


Your payroll software should be be able to implement the changes to the National Insurance calculation seamlessly. Not only should these changes in NI be reflected automatically, but you should be able to communicate directly with your employees in order to explain and contextualise any National Insurance changes they see on their payslips, which will help you improve the employee experience.


Finally, you may want to explore methods of reducing your NI bill that might benefit both you and your employees.



FAQs about Employer National Insurance


How much National Insurance do I pay?

How much National Insurance you pay is impacted by factors around how much you earn and your employment status. If you are an employee under the State Pension age and earn more than £242 a week you and your employer pay Class 1 NI contributions. They’re automatically deducted by your employer from your pay, and employers pay an additional employer NI contribution on top.


Do employers pay National Insurance in the UK?

Yes, they do. Employers deduct their employees’ National Insurance contributions and pay on their behalf. In addition, employers pay an additional National Insurance contribution on their employees’ earnings above the relevant threshold.


How much NI does an employer pay in the UK?

It depends on the size of your business and the National Insurance category of your employees. As we’ve seen, for the tax year 22/23, employers need to pay a 15.05% contribution on any employee earnings exceeding the secondary threshold, which is £175/week or £758/month.


What percentage is National Insurance?

For employees with NI class A, the NI threshold is £,1048 below which you pay 0%. Between £,1048 and £,4189 employees pay 12% and above that 2% on their income.


Do employers pay NI for employees in the U.K.?

U.K. employers are required to deduct their employees’ national insurance contributions as well as paying their own contributions