As we start a new tax year, we just want to make you aware of the key tax changes for 2022/23.
The personal allowance for income tax is unchanged at £12,570. The Chancellor has previously announced that it will be frozen at this level until 2026. The basic rate of 20% will apply to earnings between £12,570 and £50,270. This means most people will pay higher rate tax (40%) on earnings above £50,270. From April 2024 the basic rate of tax is scheduled to fall to 19%.
First announced in September 2021 the extra 1.25% to provide additional funding for the NHS and social care came into effect from 6 April. Employees will now pay 13.25% on earnings up to £50,270, with employers’ contributions rising from 13.8% to 15.05%. From July the rate at which employees pay National Insurance will increase to £12,570 which the Government claim will result in 70% of contributors paying less NI. This “tax cut” will be worth £330 per year to a typical employee.
From April 2022 lower earning self-employed will not pay Class 2 NICs on profits between £6,725 (The Small Profits Threshold) and £9,880 (The Lower Profits Limit), £12,570 from July. Despite this, individuals will still be able to build up NI credits. It is thought this will benefit around 500,000 people by up to £165 per year.
The Inheritance Tax nil rate of £325,000 and Residential nil rate of £175,000 remain unchanged. The Government clearly sees the freezing of tax thresholds as a key tool to help them reduce the public deficit and avoid the need for increasing tax rates. With house prices continuing to rise it is increasingly likely that more estates will be caught in the inheritance tax net.
Capital Gains Tax
The CGT allowance also remains frozen at £12,300 for individuals and will remain at this level until 2026.
The temporary reduced rate for the hospitality sector ended on 31 March 2022 almost 2 years after it was introduced by the Government to support eligible businesses through the pandemic.
VAT on energy saving materials such as heat pumps and solar panels has been reduced to 0% for 5 years until March 2027
Feel free to use our App with its range of tax calculators or speak to us to find our more about the changes and tax implications for you and your business for the year ahead.