The first instalment of Dafferns Tax Partner Brian King’s summary of today’s Mini Budget.
Currently, people in England, Wales and Northern Ireland pay 20% on any annual earning between £12,571 to £50,270.
From April 2023 the basic rate will be cut from 20p to 19p and the Government estimates 31 million people will benefit by £170 a year from this measure.Brian King – Dafferns Tax Partner
The 45% higher rate of income tax is to be abolished also from April 2023. This rate currently applies to annual earnings above £150,000.
From April 2023 there will be one single higher rate of income tax of 40%. Currently this 40% rate applies on annual earnings above £50,270, up to £150,000.
National Insurance contributions
The Government announced in-year reductions to National Insurance rates and the cancellation of the Health and Social Care Levy as a separate tax.
The key changes are:
- National Insurance contribution (NIC) rates will be cut by 1.25 percentage points for employees, employers and the self-employed, effectively reversing the uplift introduced in April 2022 for the rest of the tax year
- This cut will take effect from 6 November 2022 and it will cover Class 1 (both employee and employer), Class 1A , Class 1B and Class 4 (self-employed) NICs
- The ring-fenced Health and Social Care Levy of 1.25% due to be introduced from April 2023 will also not go ahead
This has been proposed to be effective from 6 April 2022 so that employers can implement the appropriate changes in their November 2022 payroll. However for some employers this timeline may not be possible and the benefits to employees may be seen in the December 2022 or January 2023 payroll.