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Grant Thornton UK LLP tax reaction: National Insurance reversal

Jonathan Berger, Employment Tax Director, Grant Thornton UK LLP, said:

“The announcement of the reversal of April’s National Insurance (NI) increase has been speculated on for the past few weeks but will be welcome news for businesses and individuals alike. Equally, the repeal of the Health and Social Care Levy that was due to be introduced from 6 April 2023, in place of the NI rise, will mean that those over state pension age who are working will not need to pay it.

“Cost bases are increasing from almost all sides for businesses - driven by rising inflation and interest rates – and the reduction in NI by 1.25% will allow them to benefit quickly at a time when it is much needed. This marks the third change to take-home pay due to National Insurance for many individuals this tax year.

Businesses will need payroll providers to act quickly to accommodate the change within their systems for November payments. The NI reversal will also reduce the expected cost of taxable benefits in kind and expenses, something that businesses will likely have a close eye on at this time.  

“With the reversal not coming into effect until 6 November, businesses should also consider the timing of any discretionary payments they may be planning to make to employees, to ensure they benefit from the reduced rate.

“It is also expected that the Chancellor will announce a corresponding reduction to the dividend tax rates.”

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