Tax year 2022/23 changes: what you need to know

Changes to National Insurance

From 6 April 2022 to 5 April 2023, National Insurance (NI) contributions will temporarily increase by 1.25 percentage points as part of the government’s plan to help fund the NHS and rising social care costs. 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)

However, it will not apply if you are over the State Pension age.

Most commonly, those earning between £190 a week (£9,880 a year) and £967 a week (£50,270 a year) will now be charged 13.25% in NICs. Earnings over £967 per week (£50,270 a year) will be taxed at 3.25% compared to the 2% imposed last tax year.

However, in July the NICs threshold will change to £12,570 per year – equal to the personal allowance threshold – rather than the current £9,880, reducing the amount of people who are required to pay National Insurance. The higher-rate threshold will remain at £50,270.

Rates of dividend tax also increase by 1.25 percentage points from 6 April 2022. The dividend tax rate for basic-rate income taxpayers will increase from 7.5% to 8.75%; for higher-rate tax payers it will rise from 32.5% to 33.75%.

Health and social care levy

From April 2023, the increase in National Insurance Contributions (NICs) will be split out separately as a health and social care levy and NIC rates will return to 2021/22 levels. At this point, the levy will also extend to individuals working above state pension age (if they earn more than £184 a week), who are currently exempt from NICs.

State Pension increase

Another tax year change to be aware of is that there has been a 3.1% increase in the full new state pension in 2022/23. This means the basic State Pension will increase to £141.85 per week and the full rate of new State Pension will increase to £185.15.

The pension annual allowance remains the same for 2022/23 at £40,000. The annual allowance is the most you can save in your pension pots in a tax year (6 April to 5 April) before you have to pay tax. You’ll therefore only pay tax if you go above the annual allowance.

Get in touch

If you would like to make more of your wealth through efficient tax planning in the new tax year, please do get in touch and we would be happy to advise. Our experienced financial advisers at George Square Financial Management help personal and corporate clients to organise their affairs in a tax-efficient manner.