Spring Statement 2022

The Chancellor of the Exchequer presented his Spring Statement 2022 to Parliament on 22 March 2022. In the wake of rising inflation, he announced some last-minute changes to the tax system. Alongside some already confirmed changes, here is the summary of key points for the next tax year.  

National Insurance  

From 1 July 2022, the Primary Threshold, above which employee National Insurance contributions start to be paid, will rise from £9,880 to £12,570 in line with the Personal Tax threshold. This now means that an individual will pay no tax or National Insurance on the first £12,570 of earnings.  

From 6 April 2022, the Employment Allowance will increase from £4,000 to £5,000. For businesses that incur Employer’s National Insurance greater than £5,000, this will mean a £1,000 saving on total wage costs (before accounting for the new rates below, however!).  

Also from 6 April 2022, the National Insurance rates will be raised by 1.25% (Health & Social Care Levy):  

2021/222022/23
Class 1 Employee NIC Basic Rate12.00%13.25%
Class 1 Employee NIC Higher Rate2.00%3.25%
Class 1 Employers NIC Rate13.80%15.05%
Class 4 NIC Basic Rate (self-employed)9.00%10.25%
Class 4 NIC Higher Rate (self-employed)2.00%3.25%
Class 2 NIC (self-employed)£3.05£3.15

Income & Capital Gains Tax

There are no changes with regards to the Income Tax & Capital Gains Tax Thresholds, allowance & rates (%’s). They will all remain the same as the 2021/22 tax year. 

National Minimum Wage

From 6 April 2022, National Minimum Wage will increase to the below hourly rates:

2021/222022/23
National Living Wage£8.91£9.50
21-22 Year Old Rate£8.36£9.18
18-20 Year Old Rate£6.56£6.83
16-17 Year Old Rate£4.62£4.81
Apprentice Rate£4.30£4.81

Dividend Tax

The dividend allowance is still at £2,000. The dividend tax rates are increased by 1.25% for each category of taxpayers for 2022/23: 

2021/222022/23
Basic Rate7.50%8.75%
Higher Rate32.50%33.75%
Additional Rate38.10%39.35%

S455 tax rate on Director’s Loan Accounts will also increase from April 2022, from 32.5% to 33.75%.

Corporation Tax & Capital Allowances

The corporation tax rate will remain at 19% but from April 2023 will rise to 25%, but with the following relief. Businesses with profits of £50,000 or below will still only have to pay 19% under the small profits rate. Those with profits between £50,000 and £250,000 will pay a rate between 19% and 25% on a tapered basis.  

The £1m Annual Investment Allowance is available until 31 March 2023, before reducing to £200,000. Businesses will therefore have until March 2023 to consider bringing forward capital investments expenditure if looking to spend over £200,000 annually.  

The temporary 130% super deduction allowance is available until 31 March 2023.

Making Tax Digital for VAT

All businesses must submit VAT returns via Making Tax Digital (MTD) from 1 April 2022.  

MTD rules will apply to the first VAT period starting on or after 1 April 2022.  

If you are already VAT registered, with annual turnover greater than £85,000, and submitting VAT Returns through MTD-compliant software, then no action should be required.

Making Tax Digital for Income Tax

Following the successful introduction of MTD for VAT in April 2019, MTD for Income Tax Self-Assessment (MTD ITSA) will be implemented next. The government has said MTD ITSA will be mandated on 6 April 2024. 

This will affect sole traders and landlords (or individuals who are both) that have an income above £10,000. 

If you are already signed up to MTD ITSA, you no longer need to send a Self-Assessment tax return with regard to income for the tax years occurring after your digital start date. Instead, periodic updates will be made to HMRC using compatible software.