April 2022 – The Basic Changes that will Affect You, Me and Everyone

Most of us are aware that the tax year runs from April 6th to April 5th every year. And, on April 6th any planned changes within the Government’s budget and economic plans generally begin – this year is no different.

So, what are the basic changes that are to be expected that may affect you?

Let’s start with some good news, the National Minimum Wage and Living Wage are set to increase for all ages, here’s a brief breakdown:

This marks an increase of 6.6% for anyone aged 23 or older and a formidable 9.8% increase if you’re aged between 21 and 23 years!

How wonderful! We hear you cry, well, yes, the increases to minimum wage are a step in the right direction for many, however, there are increases to standard deductions coming in at the same time also.

National Insurance Contribution – a line item on every payslip that you receive (hopefully!). This figure is set to increase, meaning a larger percentage of your wage will be deducted as a personal NIC. To be precise, as an employee you’re set to pay an additional 1.25% starting in April 2022. The Government are quite ferociously plastering the message that this increase is to improve social and healthcare throughout the UK. Pretty obvious justification given we’re still dealing with a pandemic, but they seem to be hammering the message home to a point that they’ve request it be noted on payslips come April (this is the choice of the employer and many see it as HMRC playing politics, which is not strictly allowed).

So… here’s the breakdown:

  • Effective April 6th 2022 National Insurance Contributions will increase by 1.25%
  • Employee NIC’s on earnings above £9,880 and up to £50,270 per year will rise from 12% to 13.25%
  • Employee NIC’s on earnings above £50,270 per year will rise from 2% to 3.25%

So exactly how much more will you pay in NIC’s? Here’s a visual that may help:

Employers will be paying a higher percentage too, but (for the most part) that’s done behind the scenes, so shouldn’t affect your personal payslip. It is proposed that in April 2023 this NIC increase will be replaced with a Health and Social Care Levy – this may lead to NIC’s dropping back closer to current levels, but only time will tell.

Actual tax deductions and thresholds are thankfully remaining frozen for the coming year, you can expect the same personal allowance as 2021-22 (£12,750) and you’ll be paying the same 20% tax on any PAYE earnings up to £37,700/annum. So no changes to report on that front.

Of course, it’s not a case of one model fits all, there are plenty of factors that may affect your personal deductions, but if you have any concerns or questions relating to the new rates please do not hesitate to contact us.

Of course, the above is a very simple overview of a very small part of how your personal income is allocated throughout the year. Current global events mean the cost of living has risen and will continue to rise – possibly to unprecedented levels – over coming months. Each and every one of us will be required to assess outgoings and adapt to the new pressures that will be facing us economically.

Though we’d like to, we cannot help everyone streamline their personal finances. But, if you are a company owner, director, sole trader, landlord or you’re self-employed in any way, we can help – we’re experts in making accounts more efficient and we’ll happily educate you in ways to save some spare change here and there though compliant accountancy practice.

Give us a call, we’d love to chat with you about your plan for 2022 and beyond.

Helena

Chat with our Ltd. Company Account Manager Helena

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