Spring Statement 2022: Measures for employees and employers
Rishi Sunak has presented his Spring Statement. Whilst significant tax changes are normally tabled for the Autumn Budget, given the unprecedented rise in the cost of living, there were calls on the Chancellor to use this Statement as his opportunity to help those most affected.
Although he chose not to postpone the forthcoming 1.25 percentage point rise in the National Insurance (NIC) Rates, a significant increase touching even the lowest of earners, he did make changes which will impact both employees and employers that, seemingly, offset some of this increase.
Increase in Class 1 NIC Primary Threshold
The Class 1 NIC Primary Threshold, the rate at which employees start to pay NIC on their earnings, is being aligned with the personal tax thresholds, from July 2022.
This means that, from July 2022, workers earning under £12,570 annually (£1,048 monthly), and on a standard PAYE tax code, will pay no tax or NIC.
Between April 2022 and June 2022, the monthly threshold is £823, as announced previously.
The Chancellor has stated that, for the typical employee, this will represent an actual tax saving of £330 annually, even after accounting for the increase in NIC rates from next month.
For employees that pay NIC on an annual basis, like directors, the limits for the year are prorated, so the annual limit for 2022/23 will be £11,908.
Moving forward, the Primary Threshold will remain aligned with the Personal Tax allowance, which is currently frozen at £12,570 until 2026.
There’s no increase in the Secondary Threshold, which is the limit at which employers contribute NIC on an employee’s earning, therefore this cash saving is purely for employees.
Increase in the Employment Allowance
The Chancellor will be increasing the Employment Allowance for qualifying businesses from £4,000 to £5,000 from April.
It’s estimated that this will benefit 30% of all businesses.
Decrease in the basic rate of income tax
From 2024, employees may see an increase in their pay packet, as a result of a 1% reduction in the basic rate of income tax. While this was a clear aim for Sunak, the documentation behind today’s announcement does contain certain fiscal principles, such as debt continuing to fall and no borrowing for routine spending, that will have to be met before April 2024 for this to come into force.
If you’d like to discuss this in more detail, please get in touch with your usual Larking Gowen contact. You can find contact details in the Our People section of our website. Alternatively, call 0330 024 0888 or email firstname.lastname@example.org.
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