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Financial changes coming into effect from April 2022

By DTA | 23rd February 2022 | News

Please also see Spring Statement 2022  news article  for any updates

The National Living Wage and National Minimum Wage rates which will apply from 1 April 2022 are:

  • National Living Wage from £8.91 to £9.50 per hour (6.6% increase)
  • 21 to 22 year old rate from £8.36 to £9.18 per hour (9.8% increase)
  • 18 to 20 year old rate  from £6.56 to £6.83 per hour (4.1% increase)
  • 16 to 17 year old rate from £4.62 to £4.81 per hour (4.1% increase)
  • Apprentice rate from £4.30 to £4.81 per hour (11.9% increase)
  • Accommodation offset rate from £8.36 to £8.70 per hour (4.1% increase) Minimum Wage Rates 2022  

The National Insurance increase from 6 April 2022

From 6 April 2022 to 5 April 2023 National Insurance contributions will increase by 1.25p. This will be renamed as a health and social care tax from 2023.

The increase will apply to:

  • Class 1 (paid by employees)
  • Class 4 (paid by self-employed)
  • secondary Class 1, 1A and 1B (paid by employers)

The increase will not apply if you are over the State Pension age.

How much you pay

The amount of National Insurance you pay depends on your employment status and how much you earn, click on the below link for more information: National Insurance: how much you pay 

VAT rise to 20% is going ahead

VAT rates will return to pre-pandemic levels as planned in April 2022. The rate will increase to 20 per cent, after being slashed to five per cent and then 12.5 per cent to support businesses during the pandemic.

Dividend tax rates

The tax rate for dividends if you own a company or shares in a firm will also rise this year.

You do not pay tax on any dividend income that falls within your Personal Allowance - £12,570 - this is the amount you can earn each year before you have to pay any tax.

The dividend tax rates for this year are rising to:

  • Basic rate taxpayers - 7.5% to 8.75%
  • Higher rate taxpayers - 32.5% to 33.75%
  • Additional rate taxpayers - 38.1% to 39.35%

The next £2,000 of dividend income is tax-free via the dividend allowance. The remaining £35,430 falls within the basic-rate tax band.

Tax thresholds to remain frozen

Here are the rates:

  • The personal allowance will remain at £12,570 in April, and every year until 2025/26
  • Basic rate - £12,571 to £50,270 20%
  • The higher rate threshold -  £50,270 - £150,000
  • The capital gains tax annual exempt amount - £12,300
  • The pension lifetime allowance - £1,073,100
  • The inheritance tax nil rate band is £325,000, and the residential nil rate band £175,000
  • Plus everything from ISA allowances to the annual gifting allowance, the high-income child benefit tax charge and the savings allowance remain the same. Rates and thresholds for employers 2022 to 2023 

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