Chartered Institute of Taxation comment on National Insurance reversal

The Chartered Institute of Taxation (CIOT) commented on the Chancellor’s announcement that the 1.25 percentage point increase in National Insurance is to be reversed from 6 November 2022 and the implications for taxpayers in Scotland.

Sean Cockburn, chair of the CIOT’s Scottish Technical Committee, said:

“The decision to reverse the increase from 6 November may create problems for payroll providers who will now need to re-programme their software to account for an in-year rate change, and for employers, many of whom prepare their staff payrolls well in advance of pay day.

“After accounting for the rate reversal, employees will pay around £30 per month less than before the increase took effect in April because the threshold for paying the levy was increased in July¹.

“Although the rate will fall by 1.25%, income tax devolution means that Scots with income between the Scottish and UK higher rate income tax thresholds will continue to pay a higher marginal rate of tax (53%) on that part of their income compared with someone elsewhere in the country (32%)².

“Scottish Ministers have argued that National Insurance devolution could help to address this anomaly by giving Holyrood the power to bring National Insurance rates and bands into line with those for devolved taxes.

“While that is possible, devolution is also likely to create additional costs and complexities for taxpayers and businesses that would likely take time to resolve”.