New Tax Rates Following Mini Budget
September 23rd saw a new growth plan by the new government members with a mini budget delivered in all but name (fiscal event). The outcome of the announcements is many changes to our tax rates and allowances. Here is a round up of the new tax rates…
Income Tax Rates & Allowances (Table A)
| Main Allowances | 2022/2023 | 2021/22 |
| Personal Allowance (PA) * ^ | £12,570 | £12,570 |
| Blind Person’s Allowance | £2,600 | £2,520 |
| Rent a room relief ~ | £7,500 | £7,500 |
| Trading income ~ | £1,000 | £1,000 |
| Property income ~ | £1,000 | £1,000 |
* PA will be withdrawn at £1 for every £2 by which ‘adjusted income’ exceeds £100,000. There will therefore be no allowance given if adjusted income is £125,140 or more.
^ £1,260 of the PA can be transferred to a spouse or civil partner who is no more than a basic rate taxpayer, where both spouses were born after 5 April 1935.
~ If gross income exceeds this, the limit may be deducted instead of actual expenses.
| Rate Bands | 2022/2023 | 2021/22 |
| Basic Rate Band (BRB) | £37,700 | £37,700 |
| Higher Rate Band (HRB) | £37.701-150,000 | £37.701-150,000 |
| Additional Rate | over £150,000 | over £150,000 |
| Personal Savings Allowance (PSA) – Basic rate taxpayer – Higher rate taxpayer | £1,000 £500 | £1,000 £500 |
| Dividend Allowance (DA) | £2,000 | £2,000 |
BRB and additional rate threshold are increased by personal pension contributions up to a permitted limit and Gift Aid donations.
| Rate Bands | 2022/2023 | 2021/22 |
| Rates differ for General (G), Savings (S) & Dividend (D) income within each band: | Rates differ for General (G), Savings (S) & Dividend (D) income within each band: | Rates differ for General (G), Savings (S) & Dividend (D) income within each band: |
| Basic % | G || S || D 20 || 20 || 8.75 | G || S || D 20 || 20 || 7.5 |
| Higher % | G || S || D 40 || 40 || 33.75 | G || S || D 40 || 40 || 32.5 |
| Additional % | G || S || D 45 || 45 || 39.35 | G || S || D 45 || 45 || 38.1 |
General income (salary, pensions, business profits, rent) usually uses personal allowance, basic rate and higher rate bands before savings income (mainly interest). To the extent that savings income falls in the first £5,000 of the basic rate band, it is taxed at nil rather than 20%. The PSA taxes interest at nil, where it would otherwise be taxable at 20% or 40%. Dividends are normally taxed as the ‘top slice’ of income. The DA taxes the first £2,000 of dividend income at nil, rather than the rate that would otherwise apply.
Registered Pensions (Table B)
| 2022/2023 | 2021/22 | |
| Lifetime Allowance (LA) | £1,073,100 | £1,073,100 |
| Annual Allowance (AA) | £40,000 | £40,000 |
Annual relievable pension inputs are the higher of earnings (capped at AA) or £3,600. The AA is usually reduced by £1 for every £2 by which relevant income exceeds £240,000, down to a minimum AA of £4,000.
National Insurance Contributions (Table C)
| Class 1 (Employees) | Employee | Employer |
| 6.4.2022 to 5.7.2022: No NIC on first | £190pw | £175pw |
| 6.7.2022 to 5.4.2023: No NIC on first | £242pw | £175pw |
| Main NIC rate – 6.4.2022 to 5.11.2022 – 6.11.2022 to 5.4.2023 | 13.25% 12.00% | 15.05% 13.80% |
| Main rate* charged up to | £967pw | no limit |
| On earnings above – 6.4.2022 to 5.11.2022 – 6.11.2022 to 5.4.2023 | £967pw 3.25% 2.00% | N/A N/A N/A |
| Directors have the following rates: – On earnings between £11,908 and £50,270 – On earnings over £50,270 | 12.73% 2.73% | 14.53% 14.53% |
| Employment allowance per qualifying business *Nil rate of employer NIC on earnings up to £967pw for employees aged under 21, apprentices aged under 25 and ex-armed forces personnel in their first twelve months of civilian employment. Employer contributions are also due on most taxable benefits (Class 1A) and on tax paid on an employee’s behalf under a PAYE settlement agreement (Class 1B). Both Class 1A and 1B are payable at a rate of 14.53%. However, where a Class 1A libility arises in relation to a sporting testimonial payment or a relevant termination award, the rate will be that in force at the time (i.e. 15.05% or 13.80%). | N/A | £5,000 |
| Class 2 (Self-employed) Flat rate per week on profits above £11,908 | £3.15 | |
| Class 3 (Voluntary) Flat rate per week | £15.85 | |
| Class 4 (Self-employed) on profits between £11,908 and £50,270 on profits over £50,270 | 9.73% 2.73% |
Note that employees with earnings above £123pw and the self-employed with profits over £6,725 access entitlement to contributory benefits.
See also our Budget Summary PDF containing the key measures announced by our chancellor in last Friday’s mini budget.
NB: On the matter of company cars and fuel, no further changes were announced in relation to the taxation of company cars and fuel. Car benefits remain fixed until the end of 2024/25.
Let’s Talk
If you need help understanding these changes or in applying them to your business plan to manage change, get in touch with our team of tax specialists today on Let’s Talk.
