National Insurance Rise
With the cost of living rising at record levels, the announcement that NICs would be increasing as a ‘Health and Social Care Levy’ in order to help the NHS recover from the pandemic came as another blow to all workers – especially those in the self-employed sector already struggling financially.
There were hopes that this might be scrapped in the Chancellor’s statement, however, it remains in place meaning that from the 6th of April 2022 an extra 1.25% will be added to National Insurance.
The employers NI is increasing to 15.05% (previously 13.8%) and the employees NI is increasing to 13.25% (previously 12%).
The only change is that there will be a £3,000 lift in thresholds from July, meaning the level at which workers start to pay NI will rise from £9,800 to £12,750.
The Chancellor stated that this will save some tax payers an extra £330 a year.
However, this won’t be a help to everyone, especially limited company contractors earning above the new thresholds. For those in this position, it is likely that they will choose to take home a larger salary to reduce the amount of dividends.
The maximum Employment Allowance will be increasing from £4,000 to £5,000 from April. Those who are eligible (businesses and charities where employer’s Class 1 NI liabilities were less than £100,000 in the previous tax year) will be able to claim a greater reduction on their secondary Class 1 NI liabilities, and from the 2023 to 2024 tax year onwards, their Health and Social Care Levy liabilities.
Another promise made by Rishi Sunak was a cut in income tax, reducing it by 1p.
However, this won’t come into effect until 2024.
This news has been met with some cynicism as the change will, perhaps conveniently, come into play just before the next election.
With many contractors needing to travel to work, the announcement of a cut in fuel duty will come as a relief.
The five pence per litre cut came into effect as of the 23rd of March at 6pm.
Although this has been welcomed and will of course be a help to most people, it has been argued that the Chancellor could have done more and reduced the cut further.
What else do I need to know?
With the end of the tax year approaching, here are some other changes that you need to be aware of:
The annual dividend allowance will remain at £2,000, however dividend tax rates are increasing from the 6th of April.
- Basic rate – 8.75% (was 7.5%)
- Higher rate – 32.5% (was 33.75%)
- Additional rate – 39.35% (was 38.1%)
This will change its name to Business Asset Disposal Relief – it means that you’ll pay tax at 10% on all gains on qualifying assets.
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