National Insurance Changes: Nannies and Employers
The National Insurance Threshold Changes From 6th July 2022
In his Spring Statement, the Chancellor announced a change to the National Insurance threshold from 6th July 2022. This threshold refers to the amount an employee can earn before paying National Insurance. So, what does this change mean for nannies and employers?
What National Insurance threshold change will come into effect from July?
From Wednesday 6th July 2022, the National Insurance threshold will increase to offset the effects of the National Insurance rise in April.
This threshold change means the amount an employee can earn before paying National Insurance will be raised from £9,880 to £12,570 a year.
How will this affect nannies and employers?
The effects of this change will depend on whether the nanny is on a Gross or Net salary agreement.
Gross Salary Agreements
Nannies on a Gross salary agreement will benefit from an increase to their Net/ ‘take home pay’ and employer is not affected by this change.
Why is this?
The nanny will see an increase to their net ‘take home pay’ as the amount they are able to earn before paying National Insurance on their earnings, has increased. There are no changes to the Employer’s National Insurance contributions and so this will not affect the nanny’s employer.
Net Salary Agreements
Nannies on a Net salary agreement won’t benefit from this National Insurance saving as Employer has committed to paying set Net/ ‘take home pay’ figure.
Why is this?
The nanny’s ‘take home pay’ will not change as on a net salary agreement, the employer has committed to paying the nanny a set net figure, each pay day. This means that whenever changes to tax and National Insurance come into play, it is only the employer who will be affected. Therefore in this instance, the employer will see the National Insurance saving.
Although this sounds beneficial to the employer this time, it is the employee that should be entitled to this National Insurance saving. There are lots more risks when committing to paying a net salary for both the employer and the nanny which are outlined in our Net vs Gross page here.
What about the nanny’s pension?
If the nanny is on a Gross salary agreement, there will be no changes to the pension contributions.
However if the nanny is on a net salary agreement, the change may reduce the nanny’s pensionable earnings. Therefore, those on a net salary agreement may see less pension contributions.
How will these changes appear on nanny payslips?
We have a handy Nanny Payslip Explainer which shows you all the breakdowns on our nanny payslips.
The Employee’s National Insurance Contributions can be found under Number 6 – Deductions: National Insurance.
The Employer’s Pension Contributions can be found under Number 8 and the Employee’s Pension Contributions can be found under Number 6 (NEST).
The nanny’s remaining Net/ Take Home Pay can be found under Number 11.
What is the National Insurance increase reverse?
The National Insurance reverse comes into effect Wednesday 6th November 2022. This means the National Insurance contribution rates for employers and employees will be cut by 1.25% You can read more about this here.
How can Nannytax help?
As the first and largest Nanny PAYE service in the UK, we are always aware of tax and NI changes on the horizon, so our customers don’t have to worry! For peace of mind with your payroll and tax obligations, look no further. Our award-winning nanny payroll service includes weekly/monthly payslips, contracts, HR and legal support plus add-on services covering insurance and pensions to give you everything you need as a UK employer.
