On 23rd March Chancellor Rishi Sunak accounced a new tax changes, which will start in April 2022. The changes are significant though, as taxpayers will begin to pay for the cost of the government’s pandemic response.
8 Most important changes in taxes:
#1: National Insurance Contributions will be increase by 1.25%
From April 2022 National Insurance rates will incease by 1.25% to pay for health and social care. This increase it will be for 2022/2023 tax year and for the next year will come down to current rate because it will be replace by the Health and Social Care Levy.
The new rates are shown in the tables below:
#2: The Class 1 and Class 4 threshold will increase from £9,880 to £12,570 in July 2022
The National Insurance thresholds, (the tables above), will be raised by £3,000 in July 2022, which means that the primary threshold for Class 1 NICs and the lower profits limit for Class 4 NICs will increase from £9,880 to £12,570 in July 2022, same amount as Personal Allowance.
This increase means that as employee you can earn more money before you start paying Class 1 National Insurance contributions.
If you are Self-employed with lower earnings you can have more profits before you start paying National Insurance. Also you can benefit from this as you will be able to build up National insurance Credits, needed for State Pensiont, but you won’t need to pay Class 2 NICs.
#3: Dividend Tax will be increase by 1.25%
A similar 1.25 % increase, to the National Insurance rates, will be in Dividends tax from April 2022. Dividends Allowance will stay same as current amount of £2,000.
The rate you pay depends on your income tax band, as shown in the table below:
#4: Personal Allowance will be freeze at £12,570 until 2026
The Government decided to freeze the Personal Allowance up to 2026 as this amount will be completely Tax and National Insurance free.
#5: Employment Allowance will increase to £5,000 in April 2022
The Government will support small businesses by increasing the Employment Allowance to £5,000 from April 2022. This is the amount you can claim against your employers’ Class 1 National Insurance.
#6: No VAT on installation of energy saving materials
The government will increase the relief further by introducing a time-limited zero rate for the installation of ESMs, like solar panels and heat pumps. The changes will take effect from April 2022.
#7: Fuel duty has been frozen at 57.95p
The government will cut the duty on petrol and diesel by 5p per litre for 12 months. This will take effect from 6pm on 23 March on a UK-wide basis. It’s the largest cut across all fuel duty rates ever.
#8: Reduce the basic rate of income tax from 20% to 19% by the end of this Parliament in 2024
The government will reduce the basic rate of income tax to 19% from April 2024. This is a tax cut of over £5 billion a year, and represents the first cut in the basic rate of income tax in 16 years. This will apply to the basic rate of non-savings, non-dividend income for taxpayers in England, Wales and Northern Ireland; the savings basic rate which applies to savings income for taxpayers across the UK. The change will be implemented in a future Finance Bill.