With the increasing cost of living, it’s imperative to be updated about the latest changes to the employment tax. From April 2022 tax bills will increase for the vast majority of the taxpayers. Throughout this article we will explain the most important changes and how they will affect you whether you’re employed or a freelancer.

2021 Autumn Budget

After the controversial tax changes announced during 2021, many taxpayers can expect an increase of tax on dividend income as well as national insurance contribution increase. This is set to increase the amount of national insurance and tax you pay.

Tax Changes

National Insurance

From 6th of April 2022 rates of national insurance is set to rise by 1.25% in order to fund and prepare for an additional Health and Social Care Levy set to be introduced from April 2023.

Earning Threshold of National Insurance is also set to rise by 3.1% from £9568 to £9880 for PAYE employees and £6515 to £6725 for self-employed.

Current National Insurance rates are presented below:

  • Class 2 NIC – £3.15 p/w (up from £3.05)
  • Class 4 NIC – up to the upper profit limits of £50.270 at 10.25% (up from 9%)
  • Class 4 NIC – above the upper profit limit of £50.270 at 3.25% (up from 2%)

Income Tax

Personal allowance is set to stay at the level of £12.570. This amount is set to stay in place until at least 2026. Over this period if your earnings rise, you’ll pay more in tax.

2022 UK Tax Brackets

If you’re self employed the tax brackets for 2022 are as follows:

  • Basic Rate – 20% between the £12.571 and £50.270 of income
  • Increased Rate – 40% between the £50.270 and £150.000 of income
  • Additional Rate – 45% on any income over £150.000
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