Income tax
No changes were announced to the rates of income tax currently in force. The Government announced previously that the Personal Allowance (PA) and Higher Rate Threshold (HRT) will remain at the 2021/22 levels, being £12,570 and £50,270 respectively. These levels will last up to and including the 2025-26 tax year.
Health and Social Care Levy
As announced by the Prime Minister on 7 September 2021, the Government has legislated for a new 1.25% Health and Social Care Levy (the Levy), to fund investment in the NHS and social care.
The Levy will be introduced from April 2022 for working age employees, self-employed people and employers. It will apply across the UK on Class 1 (Employee and Employer) and Class 4 (Self-Employed) National Insurance contributions (NICs) on the main and additional rates. The Levy will not apply to Class 2 NICs or Class 3 NICs.
From April 2023 the 1.25% Levy will be formally separated out and will also apply to the earnings of working individuals above State Pension age. At that time, NICs rates will return to their 2021-22 levels.
Dividend tax
As the Prime Minister also announced on 7 September 2021, legislation will be introduced in the Finance Bill 2021-22 to increase the rates of income tax applicable to dividend income by 1.25%.
- The dividend ordinary rate will be set at 8.75%;
- The dividend upper rate will be set at 33.75%;
- The dividend additional rate will be set at 39.35%; and
- The dividend trust rate will also increase to 39.35%.
These changes will apply across the whole of the UK with effect from 6 April 2022.
National Insurance
For 2022-23, National Insurance limits and thresholds and the rates of Class 2 and 3 NICs will be uprated using the September Consumer Price Index (CPI) figure of 3.1%. This excludes the Upper Earnings Limit and Upper Profits Limit which will be maintained at current levels.
We will circulate the thresholds when the statutory instrument is implemented before 6 April 2022.
National Living Wage
From April 2022 the National Living Wage will increase for individuals aged 23 and over from £8.91 to £9.50 per hour.
In addition, National Minimum Wage rates to apply from April 2022 will be:
- Increasing for 21 to 22 year olds from £8.36 to £9.18 per hour;
- Increasing for 18 to 20 year olds from £6.56 to £6.83 per hour;
- Increasing for 16 to 17 year olds from £4.62 to £4.81 per hour; and
- Increasing for apprentices from £4.30 to £4.81 per hour.
Universal Credit
To enable working households on Universal Credit to keep more of their earnings and progress in work, the Government announced that, by 1 December 2021, it will:
- Reduce the taper rate that applies in Universal Credit from 63% to 55%; and
- Increase the amount that households with children or a household member with limited capability for work can earn before their Universal Credit award begins to be reduced (the Work Allowances) by £500.
Company vehicles
From 6 April 2022, the van benefit charge, and both the car and van fuel benefit charges, will increase in line with CPI.
Capital Gains Tax – UK residential property reporting
From 27 October 2021, the deadline for reporting and paying CGT after selling a UK residential property will increase from 30 days after the completion date to 60 days. This is positive news and follows recommendations from the Office of Tax Simplification.
Individual Savings Accounts (ISA)
The adult ISA annual subscription limit for 2022-23 will be maintained at £20,000. The limit for Junior ISA and Child Trust Funds is maintained at £9,000.