WellTax Blog

Spring Statement 2022: changes in National Insurance Thresholds and Allowance in 2022-to-2023 tax year

March 25, 2022

On 23 March, the Chancellor Rishi Sunak announced a series of measures affecting employers, employees and self-employed.

From 6 April 2022 the Employment Allowance will increase by £1,000 from £4,000 to £5,000. Employers will pay NIC at 15.05% after the 1.25% increases announced in September 2021.

Regarding the news affecting the employees, from 6 April 2022 Class 1 NIC rates will also increase by 1.25%. However, it was recently announced that Class 1 NIC thresholds will increase to £12,570 per annum from 6 July 2022, aligning them with the personal allowance for income tax.

Most employees currently paying 12% of their income between £9,568 and £50,270 each year in national insurance and 2% on income above £50,270, they’ll pay:

  • from 6 April 2022, 13.25% between £9,880 and £50,270 and 3.25% on income above £50,270;
  • from 6 July 2022, 13.25% between £12,570 and £50,270 and 3.25% on income above £50,270.

This means the LPL will be £11,908 for the 2022/23 tax year, which is equivalent to 13 weeks of the threshold at £9,880 and 39 weeks at £12,570, as NIC is not cumulative.

As regards news affecting self-employed people, the Class 4 NIC lower profits limit (LPL) and Class 2 NIC small profits threshold (SPT) will increase in 2022/23 to £11,908. The reason for not raising it to £12,570 is to be consistent with employment income. From 2023/24 onwards they will be £12,570.

Moreover, the Chancellor announced a reduction in the basic rate of income tax from 20% to 19% with effect from 6 April 2024. The measure will apply to non-savings, non-dividend income such as employment, rental and pensions income in England, Wales and Northern Ireland (not Scotland).

Domenico Santomasi and Matteo Zaccagni

Photo by Ming Jun Tan on Unsplash

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