WellTax Blog

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

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

Related articles

06 September, 2024

Understanding Share-for-Share Exchanges

01 December, 2023

UK Autumn Statements 2023: what does it mean for individuals?

Search something