The National Insurance Rise
In April 2022 the government introduced an increase in the rates of NI under the heading Health and Social Care Levy to help towards the cost of the pandemic. This was an increase of 1.25% for both employers and employees.
Did the planned National insurance increase affect me?
The answer is very likely to be yes.
Most years see an increase in the Personal Allowances which, providing you are on a gross pay agreement, results in an increase in the net pay. The NI thresholds also increase year on year so NI kicks in later. Last year, although the NI thresholds are going up, the Personal Allowances aren’t and so the net pay for most will go down.
How much did it cost?
A nanny on £12,500 will see very little difference to their take home pay. The increase in the thresholds offsets the increase in the amount of NI due.
However, for a nanny on £30,000 gross a year for example, they will see a drop of £17.84 per month, that’s £214 less net pay per year.
Employers too, which in this context are likely to be working families, will equally have to face this extra expense.
If the nanny is on a net pay arrangement, the nanny will see no change in pay, but the employer will see a greater increase in the amount due to HMRC as they are now picking up the increased Employer and Employee NI, plus the extra pension contributions, if applicable.
If the arrangement is a gross pay rate calculated to give a certain take-home then the gross pay may need reviewing as the net pay may drop in April. We always recommend that an employer fixes the gross pay so that their costs are not automatically affected by changes to the employee’s tax and NI deductions. This makes the likely increase, due to the extra NI, optional and negotiable so it could form part of a pay increase.
Was there anything I could do?
In order to mitigate some of the impact, you could have considered some of the following suggestions.
Two part-time nannies will work out cheaper for the employer than one full-time nanny as there is less NI to pay but that may not fit in to the family dynamic as easily.
Another possibility is for employers to consider National Insurance exemptions. These include hiring nannies under the age of 21 or veterans in their first 12 months of civilian employment.
Is NannyMatters there for me?
Of course! Fortunately, this uplift was removed in full by the government in November 2022 and is currently not impacting salaries. However, there is the possibility of future uplifts even with the current cost of living crisis.
We will always provide honest, straight talking, and personable advice and assistance. If you are worried about an increase, or have general questions, please do get in touch.