The Spring Statement 2022 – Personal Taxes

Spring Statement 2022 Personal Taxes

The Spring Statement was announced on Wednesday 23rd March 2022.

The key announcements from the spring statement are shown below. It includes the main items which will affect individuals and the personal taxes they will pay.

For information on how the Spring Statement 2022 will affect your business see Spring Statement 2022 Business Taxes.

Personal Tax announcements in the Spring Statement 2022

The main personal tax announcements are below:

What will be the personal allowance in 2022/23?

The personal allowance is the amount a taxpayer can earn before they are liable to pay income tax.

It was announced previously that the personal allowance was to remain unchanged for all tax years up to 2025/26.

As a result, the current personal allowance of £12,570 will remain the same in 2022/23.

The most common tax code is currently 1257L. As there is no change to the personal allowance, the most common tax code will remain at 1257L – How to check your tax code?

How much is my personal allowance reduced by if I earn over £100,000?

When taxpayers earn over a £100,000, their personal allowance is reduced.

The reduction is £1 for every £2 of income over £100,000.

Therefore, for the tax year 2022/23 the personal allowance will be unavailable for a taxpayer with earnings in excess of £125,140.

How much is National Insurance increasing by?

From April 2022, there is to be a temporary increase in the National Insurance rate of 1.25%.

Employees NI will increase from 12% to 13.25%.

Employers NI will increase from 13.8% to 15.05%.

Self-employed NI will increase from 9% to 10.25%

This is a temporary increase. In April 2023 these rises will be removed and a health and social care levy is to be introduced.

How much are the National Insurance thresholds increasing by?

To reduce the impact of the National Insurance rises of 1.25%, the starting threshold at which it becomes payable has increased substantially.

The primary threshold, which is payable by employees was set to increase to £9,800. However it is now going to be £12,570. This is to commence from 6th July 2022.

The delay to July, will result in an annual threshold of £11,908 for the tax year 2022/23.

Employees and self-employed taxpayers will pay no NI on earnings under £11,908.

Unfortunately the employers NI threshold remains at the lower amount of £9,100.

What is the marriage allowance?

The marriage allowance gives qualifying couples a tax refund of approx £250 per annum.

It is possible to claim back 4 years producing a potential total claim over £1.2k.

Claims for 2017/18 will need to be made by 5 April 2022. (2 weeks away from date of writing).

Further information on the marriage allowance.

What are basic rate, higher rate and additional rate bands in 2022/23?

All of the rate bands have remained frozen at the 2021/22 rates.

The basic rate band remains at £37,700.

The higher rate band is charged on income over £50,270.

The additional rate band is charged on income over £150,000.

What are the tax allowances on savings income for 2022/23?

There are no changes to the allowances on savings income (i.e bank interest).

– The tax free allowance for basic rate taxpayers remains at £1,000.
– Higher rate taxpayers have a tax free allowance of £500.
– Additional rate taxpayers have no savings allowance.

What are the dividend tax rises from April 2022?

Dividend taxes will increase by 1.25% from April 2022. This is to match the 1.25% increase in National Insurance rates.

The new dividend rates from April 2022 are:

– The first £2,000 of dividend income is tax free. This is available to all taxpayers.
– 8.75% tax rate is payable by basic rate taxpayers (previously 7.5%)
– 33.75% tax rate is payable by higher rate taxpayers (previously 32.5%)
– 39.35% tax rate is payable by additional rate taxpayers (previously 38.1%)

Further information on the dividend tax rises.

What is the minimum wage in 2022/23?

The minimum wage increases to £9.50 per hour for those aged 23 years and over.

For details on the full rates see National Minmum Wage from April 2022.

What will be the optimum directors salary in the 2022/23 tax year?

The optimum directors salary will be £11,908 per annum. This is much higher than previous years and is due to the significant increase in the employees NI threshold.

Unfortunately, this is likely to create an additional burden in paying employment taxes. As a result, we expect some sole directors to pay a lower salary of £9,100 per annum.

Further information on the optimum directors salary.

When does the income tax reduce to 19%?

The current rate of income tax for basic rate taxpayers is 20%.

The Government have announced that this will reduce to 19%. However this won’t commence until 2 years time in April 2024.

How much is fuel duty reducing by?

Fuel duty was cut by 5 pence per litre for both petrol and diesel. This took effect at 6pm on 23rd March 2022.

This cut assists all motorists including individuals, small businesses and hauliers.

Read more on how the Spring Statement 2022 affects business taxes.

The above information relates mainly to taxpayers based in England.

DISCLAIMER – Please note that the content contained in this article is for general information only and is not a substitute for professional advice – read our full disclaimer

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