With inflation increasing, energy costs rising, there was some pressure on the government to delay the planned tax and National Insurance rises (which will be known as the Health & Social Care Levy). However, they have confirmed the planned rises will go ahead.
Here are four tax changes you need to be aware of:
- 1.National Insurance rates
NIC is set to increase by 1.25 percentage points from 6 April 2022.
Initially, this will be simply shown as National Insurance, but from April 2023, the plan is to split the Health & Social Care Levy from National Insurance. At this point, those over state pension age but still in work will also pay the H&SC levy.
The increase applies to both employee National Insurance, and employers National Insurance.
Employers should therefore ensure they consider the increase to the employers NIC when reviewing cashflows, pay rises, etc.
The self-employed National Insurance will also increase by 1.25 percentage points. As a result, Class 4 NIC will increase to 10.25% (currently 9%). On profits more than £50,270, the Class 4 NIC rate will increase from 2% to 3.25%.
Class 2 NIC will be £3.15 per week as from April 2022.
So, despite the headline rates being that NIC is increasing by 1.25%, as a proportion of the current rate, the increase is much higher. E.g 1.25% increase on 9% Class 4 NIC is over 13% increase.
- 2.Dividend Tax
In line with national insurance rises, the tax on dividends will increase by 1.25 percentage points. The £2,000 dividend allowance remains unchanged.
This therefore means the dividend tax rates will be:
| Income Tax Band | 21/22 Tax Rate | 22/23 Tax Rate |
| Basic Rate | 7.5% | 8.75% |
| Higher Rate | 32.5% | 33.75% |
| Additional Rate | 38.1% | 39.35% |
- 3.Scottish Tax Rates
In the recent Scottish Budget, the government announced the following tax rates and thresholds will apply to Scottish taxpayers:
| 2021/22 | 2022/23 | |||
| Tax Band | Threshold | Tax Rate | Threshold | Tax Rate |
| Personal Allowance | <£12,570 | 0% | <£12,570 | 0% |
| Starter Rate | £12,571-£14,667 | 19% | £12,571-£14,732 | 19% |
| Basic Rate | £14,668-£25,297 | 20% | £14,733-£25,689 | 20% |
| Intermediate Rate | £25,298-£43,663 | 21% | £25,690-£43,663 | 21% |
| Higher Rate | £43,664-£150,000 | 41% | £43,664-£150,00 | 41% |
| Top Rate | >£150,000 | 46% | >£150,000 | 46% |
- 4.Capital Gains Tax – Reporting of sale of Residential Property
A reminder that capital gains must be reported, and tax paid within 60 days of the sale of a residential property. This deadline was extended from 30 days in October 2021.
Please therefore ensure if you dispose of a property, your accountant is advised in a timely manner (ideally before the transaction so any planning can be reviewed).
If you would like to know how any of the above changes affect your circumstances, please do not hesitate to contact a member of our tax team on 01228 586790.