HMRC asks firms to update payroll software before November NI tax deductions

HMRC asks firms to update payroll software before November NI tax deductions

HM Revenue and Customs (HMRC) is warning traders to urgently update their payroll software systems to reflect the Government’s decision to raise National Insurance rates by 1.25%, introduced in April 2022.

The change, announced on Thursday 23 September 2022 and due to come into force on 6 November 2022, will see National Insurance (NI) rates fall by 1.25% for employees, employers and the self-employed, months after the previous government introduced higher rates. .

In a communication to businesses, HMRC warned that swift action is needed on news of tax cuts this unexpected “year” to ensure company payroll systems are updated in time for the November pay cycle and to ensure employees do not end up earning higher than required NI contributions. .

“We understand that the timeline for this is tight and some employers may not be able to implement the time changes. HMRC will direct employees to their employers to correct any overpaid NICs (National Insurance Contributions),” the communication said.

The tax collection agency has also moved to reassure companies that use the free HMRC Basic PAYE tool to manage their payroll that this software will be automatically updated to reflect the changes, urging users of alternative payroll systems to confirm what is happening with their providers. before doing .

“We have written to payroll software developers to make them aware of these changes and ask them to take relevant action. So you should contact Software Development with any questions first,” the contact added.

On 23 September 2022 the Chancellor of the Exchequer, Kwasi Kwarteng, delivered his first financial statement – dubbed the mini-budget – ahead of the government’s announced National Insurance rate cuts.

as Previously reported by Computer WeeklyVarious stakeholders in the contractor community expressed their hope in the lead up to the event that a reduction in national insurance rates would be forthcoming.

The Association of Independent Professionals and the Self-Employed (IPSE) has been strongly opposed to the National Insurance hike since it was first mooted, and its policy director Andy Chamberlain complimented the new chancellor on his “sensible decision”. it is

“Ever since the former prime minister announced this system, we have been calling for its repeal,” he said. “The increase in National Insurance will affect anyone who works, but those who work through an umbrella company – often against their will – are doubly affected, as they are unfairly forced to shoulder not just employee NI. But also the employer NI

He added: “We are delighted that the Chancellor has taken the wise decision to reverse this unfair tax increase.”

Matt Freire, managing director of umbrella company Brookson Group, agrees that the change will be warmly welcomed by umbrella company contractors, who will see their take-home pay increase as a result – provided their chosen supplier provides them with benefits.

“This is a double whammy benefit for umbrella workers, who will see a reduction in employee NICs and an increase in take-home pay due to reduced employer NICs. Umbrella workers should ensure that their umbrella employer passes on all their NIC savings to them,” he said. said

“However, this will cause an unexpected administrative burden for umbrella providers and accountants, who will need to modify their systems mid-tax year and communicate with affected employees and customers.”

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