National Insurance
Class 1 NIC
The level at which people start to pay National Insurance Contributions will rise from £9880 to £12570 – this to be introduced in July 2022. This means that everyone will be able to earn £12570 without having to pay tax or national insurance. The Government has said this will benefit more than 30m working people.
Typical savings for an employee will be £330, and for a self employed person – worth over £250.
Class 2 NIC
The Government will be reducing Class 2 NIC payments for lower earning self-employed individuals, from April 2022 self-employed individuals will not pay Class 2 NIC on profits between the Small Profits Threshold (£6275) and Lower Profits Limit, but they will continue to build up National Insurance Credits – this will benefit around a half a million self-employed people by up to £165 per year.
Employment Allowance
This is to be increased from £4,000 per year to £5,000 from April 2022 – this means that eligible businesses and charities will be able to claim a great reduction on their Secondary Class 1 National Insurance liabilities.
Please note that a Limited Company where the director is the only employee is not eligible to claim the Employment Allowance. If the company has two directors, or more than 1 employee – that earn above the secondary threshold then the business is entitled to claim the employment allowance and use this as a reduction to their Employers National Insurance Contributions.
This allowance cannot be used to reduce the liability for Class1 A NIC on benefits in kinds.
Income Tax
The Government will be cutting the basic rate of income tax by 1ppt from April 2024. This is the first cut to the basic rate of income tax in 16 years (the last cut to the basic rate was in 2008-09). Over 30m taxpayers will benefit from this policy in 2024-25, with an average gain of £175.
There will be a three-year transition period for Gift Aid relief to maintain the income tax basic rate relief at 20% until April 2027. This will continue to support almost 70,000 charities and is worth over £300m.
The cut will apply to the basic rate which applies to non-savings, non-dividend income for taxpayers in England, Wales and Northern Ireland; the savings basic rate which applies to savings income for taxpayers across the UK; and the default basic rate which applies to a very limited category of income taxpayers made up primarily of trustees and non-residents.
It is fully costed and fully paid for, including additional funding for the Scottish Government as this is a devolved matter in Scotland.
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