New Tax Year – Key changes for 2022 you need to know about
As we move into thenew tax year, we are reminded that 2022/23 may be particularly tough on ourfinances. It is essential to look ahead and be prepared for changes to the lawand how these might affect your tax and other financial circumstances. In this article,we look at five key changes for the coming year.
As part of the UKgovernment’s plan to create a health and social care levy, National Insurancerates will rise by 1.25 percent from 6 April 2022. The idea is that those inemployment will contribute to funding the social care crisis and the NHS. Theadditional funds will be taken alongside your usual National Insurancecontributions in 2022-23. However, it is anticipated that the levy will betaken separately from April 2023.
The lower earningslimits in relation to National Insurance are set to increase from £9,880 to£12,570 from July 2022. This will benefit around 30 million people in the UK whowill be able to keep more of their money before then being liable to payNational Insurance contributions. This measure has been implemented to offsetthe rise in rates. However, the upper earnings thresholds will remain the sameat £50,270.
Dividendtax rates to increase
If you earn moneyfrom dividends, you may find yourself subject to additional tax charges. Youmay be required to pay dividend tax if you have invested money in a company andearn money from dividends on your company shares. This is because, as of April6 2022, there will be an additional 1.25 percentage point rise. However, thedividend allowance of £2,000 remains the same, and you will only be charged taxon the amount you earn above the dividend allowance.
Scottishincome tax thresholds to rise
If you are based inScotland, you should be aware of potential changes to the rate of income taxyou pay. In December 2021, the Scottish Parliament set out its draft budget whichcontained plans to raise some of its income tax thresholds from April 2022.
Increasein National Minimum Wage
An important changefor both employers and employees that comes into force right before the new taxyear is an increase in National Minimum Wage (NMW) rates. The new rate of NMWwill apply from April 1 2022. For all employees aged 23 years or older, therate will increase from £8.91 per hour to £9.50 per hour.