What's changing?

From 6 July, the National Insurance (NI) threshold has increased, which means employees must earn £12,570 per year before paying National Insurance.

When are the new thresholds applied?

Once you install Sage 50 Payroll v28.02, the new thresholds appear in the Legislation Settings and are automatically applied correctly based on your process date and employee status.

Employees 

The new NI thresholds are automatically applied on all payrolls with a process date on or after 6 July 2022. 

NOTE: Your software automatically uses the previous thresholds if your process date is before 6 July 2022.

HMRC require that NI calculates period by period rather than as a year-to-date calculation. This means that NI values calculated using the new rates aren't affected by any NI calculated prior to 6 July.

Directors 

NI thresholds are different for directors depending on their status. 

• Pro-Rata (Table)​ - NI for directors who have Pro-rata status, calculates using the new employees primary threshold each period from 6 July onwards. This is then re-calculated in a year to date calculation using the Directors Primary Threshold, either at the end of the tax year, or if the director leaves during the tax year.

• Annual (Non-Table) - The new Director Primary Threshold is correctly applied in the next period as soon as you install v28.02, even if the process date is before 6 July. This may cause a re-calculation of NI liability if the director has already exceeded the original Primary Threshold, as the annual calculation will use the new Director's Primary Threshold.

Re-process pay periods

Once you install v28.02, when you re-process a pay period the NI threshold used depends on the employee's status. 

Employees

If you need to re-process a payroll before 6 July, your software automatically applies the original thresholds and then switches back to the new thresholds when the process date is on or after 6 July.

Directors

• Pro-Rata (Table) - NI calculates in the same way as for employees, your software automatically applies the correct pre or post 6 July threshold based on the process date, with the new Directors Primary Threshold used in a cumulative calculation either if the director leaves, or at the end of the tax year.
• Annual (Non-Table) - The NI calculation for any period you re-process in the tax year uses the new Directors Primary Threshold. 

Advance pay

If you advance pay from a period before 6 July into a period after 6 July, the NI calculation is as follows:

Employees and Pro-Rata directors

Your software correctly calculates NI using the original thresholds. When you next process a period with a process date on or after 6 July, the new thresholds are used.

Annual directors

When you advance pay in v28.02, your software correctly calculates NI using the new Directors Primary Threshold in all periods.