Spring Statement: March 2022News
March 29th 2022
The Spring Statement was announced on Wednesday 24th March 2022, the primary focus of which centred around measures to help those hit hardest by the rising cost of living.
Whilst the Chancellor has continued with the raise in the rate of National Insurance and dividends by 1.25%, he has countered some of the impact by raising the threshold at which National Insurance becomes payable. In addition, he announced that there will be a 1% cut to the basic rate of income tax from April 2024 (England, Wales & NI only).
More on that below, firstly, here’s a reminder of what we knew already, that the majority of allowances have been frozen until April 2026. This includes:
Income Tax allowances/thresholds:
Personal allowance – £12,570
Higher rate threshold – £50,270 (England, Wales & NI) / £43,662 (Scotland)
Capital Gains Tax: £12,300
Dividend Allowance: £2,000
Nil Rate Band – £325,000
Residence Nil Rate Band – £175,000
Set to rise to 25% from April 2023
Small companies with profits below £50,000 will continue at 19%
Reintroduction of tapering relief for businesses with profits under £250,000
Pension Lifetime Allowance: £1,073,100
With inflation expected to remain high, it is more important than ever to efficiently utilise your available allowances. If you would like to discuss further, please do get in touch with Val or Claire.
Now turning to the changes announced in the Spring Statement:
Earnings and savings: In England, Wales and Northern Ireland, the basic rate of income tax will fall from 20% to 19% from April 2024. This will apply to both non-savings and savings income. The Scottish Government will decide on the rates in Scotland from 2024 but will be supported by additional funding.
Dividends: It was confirmed that the rate of tax for dividends will increase by 1.25%. This will mean the new dividends rates for individuals will be 8.75% (basic), 33.75% (higher) and 39.35% (additional).
The increase to NI of 1.25% will go ahead as planned. This will be added to the rates of NI for 2022/23 for employees, employers and the self-employed.
It is intended that the 1.25% rise will become a separate standalone levy from 2023/24. The thresholds at which individuals will start to pay National Insurance (NI) will be brought in line with the annual personal allowance of £12,570. This will happen from July 2022 and applies to both employees and the self-employed.
Effectively anyone earning approximately £34,000 and below will pay less National Insurance than in 2021/22. Whilst the change benefits those on lower incomes its positive effect is felt most for middle-income households.
From April the self-employed will not have to pay class 2 flat rate NI contributions if their profits are below £9,880, with the lower profits limit rising to £12,570 from July.
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