Increase in National Insurance (NIC)

From April 2022, the NIC rate for employees is to increase by 1.25% to 13.25% up to £ 50,270 with 3.25% thereafter. Employer’s NIC will also rise by 1.25% to 15.05%.

For the self-employed class 4 NICs are rising from 9% to 10.25% from April 2022.

From July 2022 the amount at which individuals start paying NIC will increase to £ 12,570.

This will have the effect of reducing the National Insurance for individuals – it remains the same for the employer.

Certain benefits, including the state pension, depend on people making NICs or having income above certain thresholds allied with the NIC system and it remains to be seen how these changes impact on these entitlements. Something to keep a watchful eye on for those that may be affected.

The above National Insurance increases also apply to ‘Dividend Income’

The dividend basic tax rate will be set at 8.75% (up from 7.5%), the dividend upper rate will increase to 33.75% (up from 32.5%) and similarly, the dividend additional rate will increase to 39.35%.

The changes will apply UK-wide and will take effect from 6 April 2022.

Income Tax

No immediate change to income tax rates were announced, although the basic rate of tax will fall from 20% to 19% from April 2024.

Employment Allowance

The Chancellor made an announcement to soften the blow of the health and care levy being introduced from April 2022 for employers.

It was announced that the employment allowance was to be increased to its highest level of £ 5,000 per annum up from £ 4,000 – this is claimed via your business’ payroll scheme over the course of the year.

As announced in April 2020 the employment allowance is restricted to those employers with a secondary Class 1 national insurance contributions liability below £ 100,000 in the previous tax year.

Changes from April 2023

Temporary increase in the Annual Investment Allowance to £ 1,000,000 ends, reducing to £ 200,000, instead of happening at the end of December 2021.

Corporation Tax – the current flat rate of 19% will be increased to 25% from 1 April 2023 for companies with taxable profits over £ 250,000. The current 19% rate will be maintained for small companies with taxable profits below £ 50,000. Profits between £ 50,000 and £ 250,000 will be taxed at a marginal rate between 19% and 25%.

The upper (£ 250,000) and lower limits (£ 50,000) are reduced where there are ‘associated companies’ ― in such cases, the profit limits are divided equally among all of the associated companies. It is also these revised limits that are used in any marginal relief calculation.

The 130% super-deduction capital allowances for companies comes to an end.