Tax Hikes for 2022/23 Confirmed

It was confirmed by the government on the 7th September 2021 that some of the tax rates and national insurance rates would be increased to help with NHS and social care funding.

As of April 2022 Class 1 rates (including both primary and secondary) and Class 4 national insurance will be increased by 1.25%. As of April 2023 there will be another tax which is separate, this is the Health and Social Care levy which will apply to all workers (this also applies to those above state pension age).

There threshold for national insurance and limits will also be applied therefore any employed client earning less than £9,568 will not pay any national insurance. It is yet to be confirmed however those whose earnings are above the threshold will initially pay national insurance at 13.25% and a further 3.25% above the upper earnings limit of £50,270.

For clients who are self employed the rate of 10.25% will only be applied if the lower profits limit is exceeded. Once the profits have exceeded £50,270 the rate is also 3.25%. Employers national insurance will also increase however Class 2 and 3 contributions are3 unaffected.

To ensure that company’s don’t avoid paying the new taxes there will be a new charge by paying dividends instead of salary.

This means that the dividend tax rates will all increase to the following:

-         Basic rate band: from 7.5% to 8.25%

-         Higher rate band: from 32.5% to 33.75%

-         Additional rate bank: from 38.1% to 39.35%

This will affect small company owners because with the overall tax and national insurance bill for a single director shareholder of a company with profits of £80,000 increasing by £700 (provided profits are fully extracted).

For more information get in touch with Cheylesmore Chartered Accountants today.