As another tax year draws to a close, it’s helpful to consider the upcoming changes the new tax year will bring and how it could affect the amount of tax you pay. Continue reading as we discuss the changes you should be aware of for the 2022/23 tax year.
National Insurance threshold and rate changes
As part of the government’s plan to introduce a health and social care levy to raise additional funds for the NHS and social and healthcare industries, National Insurance rates are set to rise by 1.25% from April 2022. This will be split into a separate deduction from April 2023, and NI rates will return to their 2021/22 levels as the levy comes into effect.
Employees paying Class 1 National Insurance Contributions
For the 2022-23 tax year, you will pay Class 1 contributions at 13.25% for earnings between £9,880 – £50,270 and Class 1 contributions at 3.25% for earnings above the £50,270 threshold.
Self-employed paying Class 2 and Class 4 National Insurance Contributions
Class 2 National Insurance Contributions
In 2022-23, you’ll pay £3.15 a week on profits over £6,725. This will total £163.80 for the year.
Class 4 National Insurance Contributions
For the 2022-23 tax year, you will pay Class 4 contributions at 10.25% on annual profits between £9,568 – £50,270 and 3.25% for profits over £50,270.
Class 3 National Insurance Contributions
You may want to pay voluntary Class 3 contributions if you have gaps in your National Insurance record that might affect your eligibility for the state, pension or other contribution-based benefits. Class 3 contributions for the 2022-23 tax year are £15.85 per week.
Scottish income tax thresholds to rise
Income tax is devolved in Scotland, so there are different rates and thresholds to the other UK nations. The Scottish parliament announced in its draft Budget in December 2021 its intention to raise some of the income tax thresholds from April 2022. The table below shows how much tax you’re likely to pay in 2022-23 as a Scottish taxpayer:
|Tax band||Income||Tax rate|
|Personal allowance||Up to £12,570||0%|
|Starter rate||£12,570 – £14,732||19%|
|Basic rate||£14,732 – £25,688||20%|
|Intermediate rate||£25,688 – £43,662||21%|
|Higher rate||£43,662 – £150,000||41%|
|Top rate||More than £150,000||46%|
Dividend tax rate increases
Similarly to the National Insurance rate rises, those who earn money from dividends will also see a change in the 2022/23 tax year rates. The rates at which dividends will be taxed will increase by 1.25% from April 2022. The new rates will apply to all dividends declared on or after the 6th of April 2022. The rate you pay will depend on your income tax band and will be as follows:
- Basic rate dividends: 8.75%
- Higher rate dividends: 33.75%
- Additional rate dividends: 39.35%
Please note you are only charged tax on the amount you earn above the dividend tax-free allowance, which is £2,000 for the 2022/23 tax year.
Capital gains tax reporting extended
The changes to capital gains tax relating to the sale of properties were announced in the Autumn Budget 2021 and implemented immediately. Previously, you had 30 days to report any gains made from selling a second home or buy-to-let property and pay the tax you owe to HMRC. As of the 27th of October 2021, this window increased to 60 days. The rate of capital gains tax you pay has remained the same, but the extended window gives you more time to report and pay the tax owed.
Inheritance tax reporting change
Similarly to changes to capital gains tax reporting for property, another rule change that has already come into force is the changes to inheritance tax reporting. Starting from the 1st of January 2022, there are new rules about whether or not someone’s estate is classed as an ‘excepted estate’.
Excepted estates may not require heirs to report the value of the estate – provided there is no inheritance tax to pay, or there are any other reasons that mean the estate does not need to be reported.
To be classed as an excepted estate on or after the 1st of January 2022, the following must apply:
- Have a value below the current inheritance tax threshold which is £350,000 for the 2022/23 tax year
- The estate is worth £650,000 or less, and any unused threshold is being transferred from a spouse or civil partner who died first
- The deceased left everything to a spouse or civil partner living in the UK or to a qualifying charity, and the estate is worth less than £3 million
- The person was living outside of the UK permanently when they died, and they have UK assets worth less than £150,000
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