New Tax Year - Key changes for 2022 you need to know about
As we move into the new tax year, we are reminded that 2022/23 may be particularly tough on our finances. It is essential to look ahead and be prepared for changes to the law and how these might affect your tax and other financial circumstances. In this article, we look at five key changes for the coming year.
National Insurance increase
As part of the UK government’s plan to create a health and social care levy, National Insurance rates will rise by 1.25 per cent from 6 April 2022. The idea is that those in employment will contribute to funding the social care crisis and the NHS. The additional funds will be taken alongside your usual National Insurance contributions in 2022-23. However, it is anticipated that the levy will be taken separately from April 2023.
National Insurance thresholds
The lower earnings limits in relation to National Insurance is set to increase from £9,880 to £12,570 from July 2022. What this means is that you will be able to keep more of your money before you are liable to pay National Insurance contributions, and is going to benefit around 30 million people in the UK. This measure has been implemented to offset the rise in rates. However, the upper earnings thresholds will remain the same at £50,270.
Dividend tax rates to increase
If you earn money from dividends, you may find yourself subject to additional tax charges. You may be required to pay dividend tax if you have invested money in a company and earn money from dividends on your company shares. This is because as of April 6 2022, there will be an additional 1.25 percentage point rise. However, the dividend allowance of £2,000 remains the same, and you will only be charged tax on the amount you earn above the dividend allowance.
Scottish income tax thresholds to rise
If you are based in Scotland, you should be aware of potential changes to the rate of income tax you pay. In December 2021, the Scottish Parliament set out its draft Budget, which contained plans to raise some of its income tax thresholds from April 2022.
Increase in National Minimum Wage
An important change for both employers and employees that comes into force right before the new tax year is an increase in National Minimum Wage (NMW) rates. The new rate of NMW will apply from April 1 2022. For all employees aged 23 years or older, the rate will increase from £8.91 per hour to £9.50 per hour.