With the start of the new tax year April 6 2022 to April 5 2023 there are some key changes in UK tax. These changes have been put in place by the government mainly as an attempt to mitigate the cost of the pandemic. We thought we'd highlight five of the more significant ones:
1. Increase in National Insurance Contributions (NICs)
NICs have been increased across the board due to the government's Build Back Better strategy. This strategy sets out increases in tax to support the demand for health and social care funding after the pandemic.
Employees now pay at 13.25% (from 12%) after the primary threshold and 3.25% (from 2%) on earnings above the upper earnings threshold. However, the National Insurance threshold has been raised by £3,000, which means that employees must earn £12,570 before paying income tax or National Insurance. The upper earnings threshold though, has been frozen at £50,270. Employees pay a lower rate of National Insurance above this point.
2. Fall in Income Tax
The basic income tax rate will fall from 20% to 19% by the end of parliament in 2024. This is the first cut to the basic rate for 16 years.
The personal allowance and higher-rate thresholds have been maintained at £12,570 and £50,270 for the 2022/23 tax year. These rates are being frozen until April 2026.
3. New Business Rates Relief Scheme
A new business rates relief scheme for retail, hospitality, and leisure properties has been introduced. The 2022/23 Retail, Hospitality and Leisure Business Rates scheme provides eligible, occupied, retail, hospitality and leisure properties with a 50% relief, up to a cash cap limit of £110,000 per business.
The government has also brought forward two new business rates reliefs by a year. There are no business rates due on a range of green technology used to decarbonise buildings, including solar panels and batteries, and eligible heat networks will also receive 100% relief.
4. Increase in Minimum Wage
There have been increases in the minimum wage that must be paid to employees as a result of recommendations made by the Low Pay Commission in October 2021. The increases are as follows:
- National Living Wage (for people aged 23 and over): £9.50 (previously £8.91)
- National Minimum Wage for people aged 21 to 22: £9.18 (previously £8.36)
- National Minimum Wage for people aged 18 to 20: £6.83 (previously £6.56)
- National Minimum Wage for people under 18: £4.81 (previously £4.62)
- Apprentice rate for those aged under 19, or those over this age but in the first year of their apprenticeship: £4.81 (previously £4.30)
5. The Super-Deduction Capital Allowance Remains in Place
A super-deduction capital allowance can be used until 31 March 2023. This is set at 130% and means that companies investing in qualifying new plant and machinery assets can claim back the cost as a first-year capital allowance, plus 30% on top of that. The government's goal is to encourage firms to invest and therefore grow. There's also a further capital allowance measure for investing companies that benefit from a 50% first-year allowance for qualifying special rate (including long life) assets.