Key Tax Changes for the New Tax Year

For any business owner, 6th April is an important date within their diary as it marks the start of the new tax year where new tax rates and thresholds kick in. With a new Health and Social Care Levy to help fund the NHS following the pandemic and further announcements in the Spring Statement, there’s plenty to be aware of.

Now that we’re in the new 2022/23 tax year, below are some of the key changes that will impact your business.

National Insurance (NI):

The Health and Social Care Levy Act was announced on 7th September 2021 as a measure to increase funds for the NHS and social care following the pandemic. This measure adds 1.25% to the main and additional rates of Class 1, Class 1A, Class 1B and Class 4 National Insurance contributions (firstly as a temporary increase to the NI rates for the 2022/23 tax year and then as a separate levy from 6th April 2023).

However, within the Chancellor’s Spring Statement 2022 on 23rd March 2022, it was announced that the annual NI Primary Threshold and Lower Profits limit will increase to £12,570. The increase to the Primary Threshold will be from 6th July 2022 and it will align the starting thresholds for National Insurance Contributions (NIC’s) with income tax, with the income tax personal allowance also being £12,570 for the 2022/23 tax year.

The changes for the Class 1 rates and thresholds can be viewed within the table below:

2021/222022/23
Earnings ThresholdClass 1 RateEarnings ThresholdClass 1 Rate
Less than £9,5680%Less than £12,5700%
£9,568 – £50,27012%£12,570 – £50,27013.25%
More than £50,2702%More than £50,2703.25%

The Lower Profits Limit, which is the threshold for when self-employed profits are subject to Class 4 NIC’s, will increase to £11,908 from 6th April 2022 and then to £12,570 from 6th April 2023.

Dividend Tax:

As well as the impact to National Insurance, the Health and Social Care Levy will also see a 1.25% increase to the dividend tax rates. The thresholds for the 2022/23 year remain in line with the year prior, so the impact of the increased rates within each band are as follows:

Tax Band:Thresholds:2021/22 Rate2022/23 Rate
Personal Allowance:£0 – £2,0000%0%
Basic Rate:£2,000 – £50,2707.5%8.75%
Higher Rate:£50,270 – £150,00032.5%33.75%
Additional Rate:£150,000+38.1%39.35%

It’s worth noting that dividends don’t get Corporation Tax relief, which leads us onto our next change…

Corporation Tax:

Business owners should also be aware that corporation Tax, the tax that applies to a company’s profits, will be increasing. Currently, the main rate is 19%, but for years beginning on 1st April 2023, it will be increasing to 25%.

However, a small profits rate that will remain at 19% will be introduced for qualifying companies with profits of £50,000 or less. For companies with profits between £50,000 – £250,000, the 25% main rate will apply, but it will be reduced by a marginal relief.

Whilst this change won’t be implemented until 1st April 2023, due to the significant increase dependent on your profits, forward planning is essential especially in terms of remuneration planning.

Other key points:

  • There are increases to both the National Minimum Wage (NMW) & National Living Wage (NLW) rates for the 2022/23 tax year. More information on this can be found in our previous blog.
  • In his Spring Statement, Rishi Sunak announced the basic rate of income tax for non-savings, non-dividend income will reduce from 20% to 19% but this will not be implemented until April 2024. The income tax thresholds for 2022/23 remain the same as the prior 2021/22 tax year.
  • HMRC have reformed the VAT late submission and payment regime. More info can be found here: https://www.gov.uk/government/publications/penalties-for-late-submission/penalties-for-late-submission

Need support with your company or personal taxes?

If you have any questions regarding the above, our experts can offer real-time accounting, tax planning and business advice for owner managed businesses. Feel free to contact our friendly experts on 0845 606 9632 or email team@thesmartaccountants.co.uk.

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