As we enter the new year, it’s important to make sure you’re up-to-date on all of the latest tax changes so you can ensure you’re fully prepared and avoid any fines for getting things wrong.
In the 2021 Autumn Budget, it was announced that National Insurance rates will be rising and there will also be changes if you make a capital gain or if you have to pay inheritance tax on someone’s estate. So, let’s take a look…
Changes to The National Insurance Threshold and Rates
As announced in the 2021 Autumn Budget, National Insurance Rates are set to rise by 1.25 percentage points from 6th April 2022. This comes as part of the government’s plan to introduce a health and social care levy where working people contribute to fund the NHS and social care crisis.
Whilst it’s important to know about this extra contribution, you won’t actually have to do anything differently as this payment will be taken along with the rest of your National Insurance in 2022-23, however, the plan is to officially split out the levy from April 2023.
April 2023 also marks when the levy will be paid by those above the state pension age (66) but still working.
The National Insurance lower earning limits will increase by 3.1%, in line with September 2021 Consumer Price Index inflation. Those earning in the upper threshold, however, will be frozen at £50,270. This means you can keep more of your money before the National Insurance contributions begin, offsetting some of the effects of the rate rises.
Please see the table below for the National Insurance rates and thresholds for 201-22 compared to 2022-23 for employees and the self-employed.
Employees Paying Class 1 NICs
| 2021-22 | 2022-23 | ||
| Earnings Threshold | Class 1 Rate | Earnings Threshold | Class 1 Rate |
| Less than £9,568 | 0% | Less than £9,880 | 0% |
| £9,568 – £50,270 | 12% | £9,880 – £5270 | 13.25% |
| More than £50,270 | 2% | More than £50,270 | 3.25% |
Self-Employed Paying Class 2 and 4 NICs
| 2021-22 | 2022-23 | ||
| Profits Threshold | Class 2 and 4 Rates | Profits Threshold | Class 2 and 4 Rates |
| Less than £6,515 | 0% | Less than £6,725 | 0% |
| £6,515 – £9,568 | £3.05 per week (Class 2) | £6,725 – £9,880 | £3.15 per week (Class 2) |
| £9,569 – £50,270 | 9% + £3.05 per week | £9,881 – £50,270 | 10.25% + £3.15 per week |
| More than £50,270 | 2% + £3.05 per week | More than £50,270 | 3.25% + £3.15 per week |
Class 3 NICs
If you have any gaps in your National Insurance record that may have an effect on your eligibility for the state pension or other contribution based-benefits, you may wish to pay voluntary Class 3 contributions.a
| 2021-22 | 2022-23 | |
| Class 3 Contributions | £15.40 per week | Class 3 £15.85 per week |
Dividend Tax Rates to Increase
Much like the National Insurance rate rises, those earning money from dividends will also face a 1.25 percentage point rise from April. If you’re an investor that earns money from owning company shares, you may have to pay dividend tax. You’ll only be charged tax on the amount you earn above the dividend allowance, which is £2,000 in 2022-23 (this hasn’t changed from 2021-22)
The rate you pay will depend on your income tax band as shown in the table below:
| Income Tax Band | Dividend Tax Rate 2021-22 | Dividend Tax Rate 2022-23 |
| Basic Rate | 7.5% | 8.75% |
| Higher Rate | 32.5% | 33.75% |
| Additional Rate | 38.1% | 39.35% |
Our dividend tax calculator can help you to work out your potential tax bill.
Capital Gains Tax Reporting Extended
During the Autumn Budget 2021, it was also announced that there will be an extension to the capital gains tax reporting period. Prior to the Budget, taxpayers had just 30 days to report a gain and pay the tax owed, however, as on the Budget in October 2021, this reporting period was increased to 60 day, effective immediately.
This means anyone who makes a capital gain after selling a second home or buy-to-let property will be required to submit a residential property return to HMRC and make a payment within 60 days of the gain being made.
Changes to Inheritance Tax Reporting
Another change that recently came into effect is the new rules about whether or not the estate of anyone who dies after 1 January 2022 can be classed as an ‘excepted estate’. Estates classed as ‘excepted’ may not require heirs to report the estate’s value, so long as there’s no inheritance tax to pay or any other reasons that mean the estate should be reported.
In order to count as an excepted estate, it must:
- Have a value below the inheritance tax threshold
- Be Worth £650,000 or less and any unused threshold is being transferred from a spouse or civil partner who died first
- Be worth less than £3m and the deceased left everything in their estate to their surviving spouse or civil partner who lives in the UK, or to a qualifying registered UK charity
- Have UK assets worth less than £150,000 and the deceased had permanently been living outside of the UK when they died.
File Your 2020-21 Tax Return with Ryans
The new deadline for submitting your online 2020/21 self assessment tax return is 28th February 2022. At Ryans, we can help you to submit your tax return, helping to ensure you are fully compliant and avoid any fines for getting it wrong. If you think you could do with some assistance, please don’t hesitate to get in touch with our team on 01204 523263.