Upcoming Finance and Tax Changes April 2022

After many announcements during the 2021 Autumn budget, we will all soon see higher tax bills. For some, this isn’t a welcome change as the government had previously promised not to raise tax bills any higher.

To help you out with understanding the changes that come into effect soon, we have put together an overview of the main tax changes for 2022 and how they could affect you.

So what are the key Tax Changes in 2022 to look out for?

Class 1 National Insurance Rates- Employee

National Insurance will be rising on the 6th April 2022 by 1.25%. This is all part of the government's plan to introduce health and social care changes where working people contribute to fund the NHS and help tackle the social care crisis. Payment for this will be taken alongside your National Insurance until 2023, where the payments will then be split. This gives greater transparency around tax changes and what your national insurance payments are going towards.

If you’re paying Class 1 NIC and earning between £9,880 (£12,570 from July) and £50,270, you will now pay a tax rate of 13.25% instead of 12%. If you earn over £50,270, you will make payments at a rate of 3.25% instead of 2% on any income above the upper threshold.

Class 1 National Insurance Rates - Employer

Employers are not escaping the NIC rise either and the rate has also increased from 13.8% to 15.05% from April 2022.

National Minimum Wage

Another change which will affect disposable income and the amount of tax paid is the uplift to national minimum wage rates. This is worked out based on the employee's age and it is important to make sure that you are paying the right amount of tax for every employee. The table below shows the rates for 2021/22 and 2022/23.

Statutory Maternity, Paternity, Shared Parental and Bereavement Pay

The weekly rates for these types of payments will also change in April 2022. For maternity pay, allowance and parental pay, you will now receive £156.66 per week or 90% of your weekly earnings if the figure is less than the statutory rate. For parental bereavement pay, you will receive the same at £156.66.

Statutory Sick Pay

HMRC has also confirmed that Statutory Sick Pay (SSP) will be £99.35 per week. However, employees must be paid for each day they are off work due to an illness. The daily rate would then depend on the number of days that they work each week. Get in touch with us if you would like more information on this.

Dividend Tax

A dividend tax is charged at a different rate than income tax. If you’re the director of a limited company, this is seen as the most tax-efficient way to pay yourself. You’ll pay income tax on the salary part of your income and then dividend tax on dividends. The rate of dividend tax depends on what rate of income tax you pay. If you are on the basic taxpayer rate, you will pay dividend tax at the ordinary rate. As of April 2022, this is 8.75% which is a 1.25% increase from the 2021/22 rate. Higher rate dividend taxpayers will be charged 33.75% instead of 32.5% and additional rate dividend taxpayers will pay 39.35% instead of 38.1% respectively.

Corporation Tax

Although the rate of tax levied on businesses is unchanged for 2022/23 at 19%, businesses earning more than £250,000 in profits should be making plans already to adjust to a significant increase in the rate to 25% from 1st April 2023. A new small profits rate (SPR) of 19% which applies to small businesses making profits under £50,000 will be introduced in April 2023. Companies with profits between £50,000 and £250,000 will pay tax at the main rate by may be able to claim some marginal relief.

Understanding everything you need to know about tax changes in 2022 and 2023 can be time-consuming. Get in touch with David Masih, our client relationship partner. David can explain how we can support you to do more with your business during a no-obligation chat today. Call 03330 067 123 or email info@onthegoaccountants.co.uk.