On March 23rd, 2022, Rishi Sunak, Chancellor for the UK, announced the Spring Budget.
There were some unexpected announcements during the Spring Budget in relation to businesses,
- Change to National Insurance Contributions Threshold
From July 2022, the threshold for paying National Insurance Contributions will increase to £12,570. This means that NI Contributions will not be deducted from employee wages until they have met the threshold. It is important to note, that this new rate only applies from July 2022. From April 2022 to July 2022, the threshold is £9,880 before NI Contributions need to be paid.
- Increase to Employment NI Allowance
Small businesses that employ at least two people who are paid above the Class 1 NIC Secondary Threshold are allowed to claim Employment Allowance. This has allowed them to claim the first £4,000 towards Employer NI Contributions, reducing how much they pay to the government per year. The government has announced that this will be increasing to £5,000 from April 6th, 2022.
- Health and Social Care Levy
The new tax announced in September 2021 – the Health and Social Care Levy. From April 6th, 2022, Class 1 NIC paid by employers and employees, and Class 4 NIC paid by those who are self-employed, will increase by 1.25 percentage points. From April 6, 2023, this tax will be split away from National Insurance and be calculated separately, meaning that the NI contributions will return to their previous levels, with the Health and Social Care Levy being calculated separately.
- Working from Home
During the pandemic, the government allowed employees to claim for various expenses for working from home – either from their employer or directly from HMRC. This has now been stopped for the 2022/2023 tax year.
- Decrease of Basic Rate of Income Tax
The Chancellor announced that by the end of the current government in 2024, he is aiming to cut the basic rate of income tax from 20% to 19%.
- Dividend Income
The tax rates on dividend income over £2,000 will increase for the 2022/2023 tax year. The new rates are as follows:
Basic Rate: 8.75%
Upper Rate: 33.75%
Additional Rate: 39.35%
The rates of tax paid are based on your income tax rate.
- Reform of Tax Basis Period
The government has announced the basis period for businesses and how their taxable profits will be calculated differently. This will only affect businesses who have a different year-end to March 31st or April 5th. From April 6th, 2024, all businesses will need to submit their tax returns following the same timeframe as the tax year. You can read more about it here.
- Corporation Tax
The current rate of corporation tax – 19% – will remain in effect until March 31st, 2023. At that point, it will increase to 25% for all companies with profits over £250,000.
You can read more about the Spring Budget here.