Happy New Tax Year!

We have now bid adieu to 2021/22 and stepped foot into the 2022/23 tax year, which runs from 6th April 2022 to 5th April 2023. In this week’s blog, we break down what the start of the new tax year means for you, and what allowances are available to you in 2022/23.

Personal allowance

The personal allowance for 2022/23 remains the same as 21/22 at £12,570.

Rates of income tax

Again, the income tax bands remain the same as last year, at:

Personal allowance-        Up to £12,570                   0%

Basic rate-                          £12,5711- £50,270          20%

Higher rate-                       £50,271- £150,000          40%

Additional rate-                £150,001 +                        45%

The above assumes entitlement to the standard personal allowance.

National Insurance Rates

To take into account the new Health and Social Care Levy, NI rates have increased.

Class 1 (employees)- Assuming a standard NI category, this now means earnings over the primary threshold (see details below) up to the upper earnings limit have NI applied at 13.25%, and over the upper earnings limit at 3.25%.

Class 1 (employers)- this has now increased to 15.05% on employee wages over the secondary threshold.

Class 2 (sole traders)– This is £3.15/week for profits over the Small Profits Threshold.

Class 4 (sole traders)– For profit over the Lower Profits Limit, the NI rate increases to 10.25%, and over the Upper Profits Limit, increases to 3.25%.

National Insurance thresholds

As detailed in the Spring Statement, the Primary Threshold will be increasing from July 2022 (the below figures are annual):

Lower Earnings Limit-     £6,396

Primary Threshold-         £9,880 increasing to £12,570 in July

Secondary Threshold-     £9,100

Upper Earnings Limit-     £50,270

Small Profits-                    £6,725                 

Lower Profits Limit-         £9,881

Upper Profits Limit-         £50,270

Tax free dividend allowance and dividend tax rates

This also remains the same for the new tax year, with the first £2,000 of dividends received being tax free.

However, the rates at which subsequent dividends are taxed have also increased, to take into account the Health and Social Care Levy:

Basic rate-                          8.75%

Higher rate-                       33.75%

Additional rate-                39.35%

Personal savings allowance

Again, this remains the same as 2021/22, with basic rate tax payers being able to receive up to £1,000 interest tax free, and up to £500 for higher rate tax payers.

Employment Allowance

In the Spring Statement, it was announced that this would increase to £5,000 per year per eligible employer for 2022/23.

Capital Gains Tax

Neither the rates of CGT have changed, nor the Annual Exemption Allowance which remains at £12,300.

Business Asset Disposal Relief (previously Entrepreneurs Relief)

This is still available at 10%, with a lifetime limit of £1million.

S455 tax (on director’s loan accounts)

This has increased in line with the higher rate dividend tax to 33.75%.

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