Directors' National Insurance and the January 2024 NI changes

In the Autumn Statement 2023, the chancellor announced changes to National Insurance that affect Payroll. 

 TIP: If you'd like to find out more about the changes, visit our national insurance changes from the Autumn Statement 2023 guide. 

We've brought together some common questions and answers on how these changes affect directors NI below.

If you'd like to get started with some general information on Directors NI, visit our processing directors guide.

How will directors be affected?

National Insurance for Directors on an annual basis will be calculated using a single annualised rate, regardless of when the calculation is being performed in the 2023/2024 tax year.

Directors on a pro-rata basis will use the NI rate in effect on the process date, that's 12% or 10%. Then in their last pay period of the tax year it switches to the annual calculation as usual, using the annualised rate.

How will directors' NI recalculations work at year end?

The year end recalculation will use the annualised NI rate, rather than the rate in effect on the date of processing.

As required by HMRC, Sage 50 Payroll automatically calculates Pro Rata basis directors' NI using the Annual basis in the last period of the tax year.

What if a pro rata basis director leaves after January 6 2024 but before payroll year end?

In this case, the NI on their final payment must be calculated using the annual basis, and the annualised rate. To do this, select the checkbox in enter payments beside 'Select this check box if your employee is leaving and this is their final payment'.

What happens if I need to reprocess earlier periods?

If a pay period for a director on an annual basis is reprocessed, the annualised rate is used. This may mean that a different rate of NI is calculated compared to when you first processed the period you're correcting. This correct, as the new rate applies to the whole tax year.

 NOTE: This means any payroll you process for December 2023 after installing v29.03 the new rate is used. This is correct as it's an annualised rate. 

If a pay period for a director on a pro-rata basis is reprocessed, the rate in effect at the process date is used.

Where can I view the rates?

You can check both current and previous NI rates within your software. 

1. Click Payroll, then Change Process Date.
2. Set the process date to the date you'd like to check the rates for.
    TIP: Set it to 06/04/2024 onwards to check the new rates. 
3. Click Company and then Legislation.
4. Click the NI tab.
5. Click the drop-down menu beside NI bandwidths and rates effective from and set the date you'd like to check.
6. Click the drop-down menu near the top that defaults to Employees, and click Directors.
7. Under the Rates heading, click the drop-down beside National Insurance Category.
8. Select the NI category you'd like to check.

You can now check the thresholds and rates in the NI table.