As an employer you’ll soon need to implement new NI rates. What steps should you take to ensure that your payroll software is ready?
Key date
You or your payroll manager will no doubt have 6 November 2022 marked in red on your calendar. That’s the date on which the reduction in NI rates applies. However, the new rates won’t be effective until you run your payroll for the first time on or after that date. Many payroll software providers are still grappling with the tricky changes needed to their apps. There’s real concern that some might not make it by the November date.
Tip. Before running your first payroll on or after 6 November check the software company’s website (including HMRC’s Basic PAYE Tools) to ensure you’re running the latest version of its app. Download any updates if necessary before running your payroll.
Directors and special cases
It’s very important to check that the annual NI earnings period has been selected for directors and for employees who HMRC has been notified you have an annual earnings period . The method of selecting this varies depending on what software you use. Check the user guide if you’re unsure where to look.
Trap. A different NI rate applies to salary for directors and employees with annual earnings periods. It’s not just their NI that’s affected, so are the employer contributions. Your business may have to pick up the bill for any NI a director or employee underpays as a result of not using the correct earnings period.
Payroll message
If you followed HMRC’s recommendation to include a message on employees’ payslips about the increase in NI rates which applied from 6 April, you should remove that message for payroll runs on or after 6 November.
Tip. Don’t panic if for any reason you’re unable to update your software in time, meaning that the new NI rates aren’t applied to your first payroll on or after 6 November. To correct the position you’ll need to run the payroll again, refund the employee any overpaid NI and send an amended full payment submission to HMRC.
Check for software updates before running your payroll for the first time on or after 6 November. Ensure directors are shown as having an annual earnings period. Remove payslip messages about the April 2022 NI increase.
This article has been reproduced by kind permission of Indicator – FL Memo Ltd. For details of their tax-saving products please visit www.indicator-flm.co.uk or call 01233 653500.