National Insurance Contribution Tax Changes UK 2022
The UK Government has announced temporary changes in the tax rates and thresholds for National Insurance Contribution, PAYE, National Minimum Wage, Maternity and Paternity pay, Employment Allowance, and others. Unless stated otherwise, the following changes are applicable from 6 April 2022 to 5 April 2023.
National Insurance Contribution
From 6 April 2022 to 5 April 2023, the National Insurance Contribution will increase by 1.25%. The funds accumulated this way will then be spent on the NHS and social care across the UK.
The increased NIC will apply to:
- Class 1 (paid by employees)
- Secondary Class 1, 1A, and 1B (paid by employers)
- Class 4 (paid by self-employed)
The individuals above the state pension age will be indifferent to the change in the NIC rate.
Class 1 National Insurance Contribution Rate
You will pay class 1 NIC if you are an employee, and the latest rate for class 1 NIC is 13.25% if you earn between £190 to £967 a week (£823 to £4,189 a month), and 3.25% above £967 a week (£4,189 a month)
Class 1A NIC: Expenses, Benefits, and Termination Rewards
The rate for Class 1A NIC for 2022 to 2023 is 15.05%. Class 1A NIC applies to the benefits and expenses an employer gives to his employees and the termination awards paid to employees, which are over £30,000.
Class 1B National Insurance
The revised rate for class 1B is 15.05%. You will pay Class 1B NIC if you have a PAYE Settlement Agreement which allows you to make a single annual payment covering all the NIC on small taxable expenses and benefits for your employees.
Health and Social Care Levy
The NIC contribution will increase from 6 April 2022 to 5 April 2023 due to the health and social care levy. Employer Class 1, employee Class 1, Class 1A, Class 1B, and Class 4 NIC will increase, for one year, by 1.25%.
This change will not affect you if you are not employed or self-employed and above the state pension age.
From 6 April 2023
The separate levy of 1.25% will apply to the same amounts for the following classes of National Insurance contributions:
- Class 1 (above the primary and secondary thresholds)
- Class 1A and Class 1B (employers)
- Class 4 (self-employed)
Relief to Separate Levy
All current NIC reliefs will apply to the separate levy for:
- employees under the age of 21
- those eligible for the Employment Allowance
- apprentices under the age of 25
- armed forces veterans
- qualifying Freeport employees
After 5 April 2023, the NIC rates will be reduced to the former level, and the levy will become a separate new tax of 1.25%.
Increase National Minimum Wage
The National Minimum Wage is the minimum compensation a worker is entitled to by the law. The revised rate is £9.5 per hour for a person aged £23 and above; and £9.18 for people aged 21 to 22. The wage rate for apprentices under 19 is also increased to £4.81 per hour.
Employment Allowance allows eligible employers to bring down their annual National Insurance payment by up to £5,000.
Making Tax Digital
From 1st April 2022, all MTD rules will apply to all VAT registered businesses. All VAT-registered businesses will use MTD-compatible software to keep their VAT record and submit the VAT returns digitally, covering their business’s VAT period. HMRC is also implying penalties to make businesses comply with MTD rules.
VAT for Hospitality Businesses
The VAT relief for hospitality businesses that the Government offered during the pandemic will end on 1st April 2022. The rate of VAT that businesses charge will revert to 20%.
Tackle These Tax changes
To ace the race, it is important that your business should be as tax efficient as possible.
And with the added tax burden it is now more important to tackle these changes effectively. If you have any ambiguity regarding new tax changes, and if you need any advice, please contact Care Accountancy.
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