Changes in taxes from April 2022, i.e. taxes and deductions for 2022/2023 in the UK

The announcement of the new UK budget for the next financial year, starting on April 6 2022, sparks much excitement. Following the COVID-19 pandemic, the government must continue to put measures in place to fund the NHS and other public sectors.

The government wants to achieve this by; imposing changes to NI contributions and tax on dividends, increasing the minimum hourly wage and changing prices in certain economic sectors. But what other changes will we have to take into account? Within this blog, we will look at the changes we are to expect from 2022/2023.

What’s most important – which prices will change?

Cigarettes, alcohol and fuel prices will be affected by changes to excise tax. Whilst the price of cigarettes will increase, we will see a drop in alcohol prices and fuel prices are set to stay the same. 

Fuel prices have been fluctuating over the last couple of years, so it is most interesting to hear that the excise tax on fuel will not change. In fact, the excise tax on fuel will not be changed for at least another year, if not longer. 

In Great Britain, alcohol prices have not changed for two years, and the excise tax has remained the same. However, there are changes expected to be put in force in February 2023. Which would see new, simplified excise duty rates introduced. Alcoholic drinks will be taxed in proportion to their alcohol content. The stronger the drink, the more we will pay for it. This is not, however, tantamount to an increase in alcohol prices. According to expert calculations, we will pay as much as 5% less for beer, cider or wine than before. On the other hand, high-percentage drinks will be more expensive.

The government has decided to increase the excise duty on cigarettes and tobacco. There will be a surplus in the prices of these products by as much as 11%. 

Amount free from NI and tax in the tax year 2022/2023

According to the regulations in force in the tax year 2021/2022, the tax-free earnings will not change, and interestingly, they will remain at the same level until 2026.

This additional band was imposed on the British for the first time in the tax year 2021/2022 following the COVID-19 pandemic. The additional rate was introduced to share the costs between companies and individuals. The British Prime Minister emphasised then that the purpose of such a raise is to obtain money from people who earn more than the national average.

Accordingly, for the tax year 2022/2023, starting April 6, 2022, the tax-free earnings will remain at £ 12,570.

How does it compare to our earnings? We will pay:

45% tax if our annual income exceeds £ 150,000,

40% tax, if our annual income is between £ 50,271 and £ 150,000,

20% tax if our annual income is between £ 12,571 and £ 50,270.

However, it is essential to note that the NI contribution will change from 2022. An increase of 1.25% will apply to employers, employees and the self-employed. In addition, the tax on dividends will also increase. Along with these increases, there is also a limit on fees for nursing homes introduced in the tax year 2021/2022. Anyone with assets between £20,000 and £100,000 is eligible for donation. However, it depends on the wealth of a given person.

Minimum wage – changes in PIT 2022/2023

Whilst it may seem the government are taking more money from employees through taxes they are working to increase the minimum wage. Alongside the numerous additional fees we now face, every Briton can expect a salary increase. This amount will be 6.6% higher than the current minimum wage per hour. Currently, people aged 23 and older receive £8.91 per hour. From 2022 it will be £9.50 per hour. Not everyone knows about it, but earnings in Great Britain depend on age. These changes will also apply to other age groups.

What will the rates be?

The minimum hourly wage is as follows from April 2022:

Apprentices and employees under 18 years of age – £ 4.81,

People between 18 and 20 years old – £ 6.83,

Employees aged 21 to 22 – £ 9.18,

Employed persons over 23 years of age – £ 9.50.

In addition, the government has prepared pay raises for public sector workers whose wages have been frozen during the pandemic. According to experts and government forecasts, the increase in earnings in relation to inflation and changes in taxes will grow until 2026 – every year by 1.5%.

What other changes in PIT await us in the tax year 2022/2023?

Many taxpayers wonder if this is all that the Government has prepared for them. Unfortunately, not. The Government plan to lower and increase prices in individual sectors of the economy. So, what else do we have to consider when settling PIT (personal income tax)?

More expensive airline tickets.

The increase in the cost of airline tickets will be the result of changes to the Air Passenger Duty, i.e. the fees applicable to airlines. However, these costs will fall on the passengers and not on the carriers. Thus, we must consider the increase in the prices of international tickets.

Business rates reduction.

The UK Chancellor, Rishi Sunak, announced a cut for business rates, the municipal tax for entrepreneurs. It is important to note that it is clearly stated that this is a temporary solution. It will be as much as 50% lower, but up to a maximum of £ 110,000.

Until March 2022, VAT on tourism and hospitality also increased – to 12.5%, and the threshold for registering a company for VAT will remain unchanged.

Therefore, the tax year 2022/2023 will not bring huge changes in taxes. However, it is worth keeping an eye on the situation in the country. The regulations coming into force in the UK and worldwide are primarily related to the huge economic hole caused by the COVID-19 pandemic, which has not left us since 2019. Interestingly, the changes do not affect only one country, but the regulations are changing in most European countries. Rishi Sunak admitted in many interviews that, among other things, due to the pandemic, the UK economy has experienced the most significant decline in over 300 years. Hence the idea for a project that will help in this unique period.