Chancellor, Rishi Sunak announced the Spring Budget recently. It comes with lots of changes, with some welcomed more than others. Here’s our overview of the changes we can expect in the coming months.
National Insurance thresholds
- The threshold for paying Class 4 National Insurance Contributions will be aligned with the personal allowance from July 2022. The effective annual threshold for 2022/23 is £9,880 and self-employed individuals will pay 10.25% on profits exceeding this amount. The annual threshold will be £12,570 for 2023/24.
- The threshold for paying Class 2 National Insurance Contributions will also be aligned with the personal allowance during 2022/23. The effective annual threshold for 2022/23 is £11,908 and self-employed individuals will pay £3.15 per week (£163.80) if their profits exceed that amount. The annual threshold will be £12,570 for 2023/24.
- Self-employed individuals with profits between £6,725 and £11,908 will not have to pay any National Insurance, but will receive the credit that retains entitlement to state benefits.
- The threshold for paying Class 1 National Insurance Contributions will be aligned with the personal allowance from July 2022. Employees can earn £190 a week from 6 April and then £242 a week from 6 July before paying National Insurance. Employee’s National Insurance will be payable at 13.25% (for earnings over the upper earnings limit the rate is 3.25%).
- Directors pay Class 1 National Insurance based on annual earnings rather than weekly or monthly earnings. For 2022/23 the annual threshold is £11,908 and this will increase to £12,570 from 2023/24.
- No changes are being made to the employer National Insurance thresholds. These remain at £175 per week for 2022/23 as expected, and the rate will be 15.05%.
Other announcements and changes
- A reduction in basic rate tax from 20% to 19% has been promised from April 2024, in time for the next General Election. This will not apply automatically to Scottish Taxpayers.
- The Employment Allowance for employers will increase from £4,000 to £5,000 from April 2022. Eligible employers can claim 100% relief from the first £5,000 of their employer National Insurance Contributions.
- Installation of qualifying Energy Saving Materials, which will include solar panels, wind-turbines, thermal insulation and water turbines will benefit from Zero-rating for VAT (currently 5%) from 1 April 2022 until 31 March 2027. The zero-rating will not be available in Northern Ireland, but separate funding has been promised.
- Fuel Duty is reduced by 5 pence for 12 months.
- There has been no extension to the reduced VAT rates for the hospitality and leisure industry which will return to 20% from 1 April 2022.
- No measures were announced to tackle rising energy costs.
- The business rates multiplier will be frozen for 2022-23 and there will be a new 50% relief for eligible retail, hospitality and leisure businesses.
- The £1 million Annual Investment Allowance limit is extended to 31 March 2023.
- Changes to Research & Development relief have been announced, with legislation to follow later this year.
For more information
- Contact Kathryn Greenwood on 07980 308548 or email kathryn@greenwoodtax.co.uk.
- Visit my website www.greenwoodtax.co.uk.
- Find me on facebook @GreenwoodTax and on LinkedIn.
