Now we are well into the swing of the new tax year, there are several changes that the self employed need to know about. We should be on top and aware of any financial changes which could impact us. Let's have a look at some of these tax year changes.
National Insurance Hikes
The first tax year changes are to do with National Insurance. NI for the self employed is paid through the self assessment tax return. Most of us pay both Class 2 and Class 4 NI. Small business owners with employees pay NI contributions via payroll. In this new tax year, National Insurance tax rates are rising by 1.25 percentage points. This is a temporary rise however it will be replaced by the Health and Social Care Levy in 2023, which is the same percentage hike.
Whilst there is a NI increase we might not want, the National Insurance threshold rises from July 2022. Meaning that you can earn more before you begin to pay contributions.
Personal Allowance Freeze
The amount that you can earn tax free remains the same for the 2022/23 year. It stays at £12,570. With inflation on the rise, it was hoped by many that it would have risen. However it remains the same and will stay at the same figure until 2026. This means that if you earn more due to wage increases (see below), you'll pay more tax.
National Living Wage Increases
As mentioned, there is a national living wage increase. Prior to April 2022, the rate was £8.91. It is now £9.50 per hour. For 21 and 22 year olds it has risen to £9.18 whilst for anyone in the 18-20 bracket will now get £6.83. Apprentice rates and wages for 16-17 year olds have both now risen to £4.81. These tax year changes are important for both employers and employees.
A Brand New Tax
Finally, something you might need to be aware of is a brand new tax. It is all to do with plastic packaging. Anyone who manufactures or import 10 or more tonnes of plastic packaging within a 12 month period, or will do in the next 30 days, will have to register for this new tax. It is charge at £200 per tonne. You can read more about the plastic packaging taxhere.
It is worth staying on top of all the tax year changes and making yourself aware of how things can affect you. If you are looking for an accountant to help you navigate these tax year changes and help with your books, please do get in touch.