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Self-Employed Tax Brackets 2022/23

 You might be wondering if anything has changed for the new tax year of 2022/23 for self-employment? Well, there are always a couple of new UK tax brackets and some new updates to thresholds introduced each year in April. Here's a handy guide about the self-employed tax changes.

Are there changes to personal allowance for 2022/23?

Your personal allowance for 2022/23 will remain at £12,570. This is how much you can earn tax-free.

The government has stopped this tax allowance from changing until 2026, meaning UK taxpayers and businesses will have to pay more tax if earnings rise.

What are the UK tax brackets for the self-employed 2022/23?

The income tax rates and thresholds for self-employed people have remained the same in 2022/23 as 2021/22:
  • Basic Rate – 20% on income between £12,571 and £50,270 – you pay tax on £37,700.
  • Higher Rate – 40% on income between £50,271 and £150,000
  • Additional rate – 45% on income above £150,000

Need more guidance about filing Self-Assessments? Click here. 

Has National Insurance gone up this year for the self-employed?

Yes, the government has increased the National Insurance tax rates for 2022/23 by 1.25%, in a bid to help pay for the costs of the coronavirus response. Although the rise is temporary and will eventually be replaced next year by the Health and Social Care Levy, the levy also stands at 1.25%.

The self-employed pay their National Insurance through their annual Self Assessment tax return, usually both Class 2 and Class 4, and those with staff also need to pay the National Insurance Contributions of employees via payroll.

It has also been announced that the thresholds for National Insurance will be increased from July 2022 onwards, meaning people can earn more before paying National Insurance.

What are the tax thresholds for Class 2 NICs and Class 4 NICs?

2022/23 Tax thresholds
  • No National Insurance incurred between £0 to £6,724
  • Small profits threshold for Class 2 NICs: £6,725
  • Lower profits limit for Class 4 NICs: £9,880 (increasing July 2022)
  • Upper profits limit: £50,270
The National Insurance rates:

Class 2 NICs: £3.15 per week
Class 4 NICs up to the upper profits limit: 10.25%
Class 4 NICs are above the upper profits limit: 3.25%

 

Class 1 - Employer & employee National Insurance contributions

 

If you also have income from employment, or are an employer, these are the National Insurance tax thresholds for Class 1:

 

Tax thresholds for Class 1 (primary) National Insurance:


  • Lower earnings limit: £123 per week, or £6,396 annually.
  • Primary threshold: £190 per week, or £9,880 annually (increasing July 2022).
  • Upper earnings limit: £967 weekly, or £50,270 annually.

 

National Insurance Contributions stand at 13.25% in 2022/23 for earnings above the primary threshold. For earnings above the upper earnings limit, this is 3.25%.

 

Tax thresholds for Class 1 (secondary) National Insurance

 

Employee NICs are due above a certain threshold, which is £9,100 (or £175 per week) in 2022/23, increasing from £8,840 in 2021/22.

 

National Insurance is also due at this rate on any work benefits you give employees.

 

NEW wage rates for employers(from April 2022)


  • National living wage: £9.50
  • Rate for 21-22 year olds: £9.18
  • Rate for 18-20 year olds: £6.83
  • Rate for 16-17 year olds: £4.81
  • Apprentice rate: £4.81

 

What are the tax rates for dividends in 2022/23?

 

As well as the increase of National Insurance rates, the tax rate for dividends is also rising by 1.25%.

 

You’ll pay dividend tax on the dividends you earn above £2,000 (the dividend allowance) at the following rates:

 

  • Basic rate taxpayers – 8.75 per cent (up from 7.5 per cent).
  • Higher rate taxpayers – 33.75 per cent (up from 32.5 per cent).
  • Additional rate taxpayers – 39.35 per cent (up from 38.1 per cent).

 

You can read more about dividends and learn if salary or dividends is better for you by clicking here.


Making Tax Digital extended to all VAT-registered businesses

 

In place for VAT-registered businesses with a taxable turnover of more than £85,000 since 2019, the Making Tax Digital system begins its next phase.


From now on, all VAT-registered businesses must keep digital records and file VAT returns digitally using relevant accounting software.

 

Ultimately, all taxpayers will be required to use Making Tax Digital, although it won’t be made compulsory for Self Assessment returns until at least 2025.

 

More time to understand points-based tax penalties

 

A new tax-penalty system based on points has been delayed until January 2023, from its initial implementation date of April 2022.

 

Although it was meant to be launching last April alongside the rollout of Making Tax Digital to all VAT-registered businesses, it's been postponed as HMRC’s systems weren't ready.

 

This gives businesses more time to learn more & prepare for the changes.

 

The new Plastic Tax has come into force.

 

A new packaging tax has come into force in April for those who, as part of their business, import or manufacture plastic packaging, although it won't apply to every business who uses plastic.

 

According to the gov.uk website, it only applies “if you’ve manufactured or imported 10 or more tonnes of finished plastic packaging components within the last 12 months, or will do so in the next 30 days.”

 

Those who meet either of those thresholds have to register for the tax.

Business rates discount

 

Although many businesses now face the uncertainty of tax increases and rising costs, there is some good news; businesses in the retail, hospitality and leisure industries will get a 50% discount on their business rates, with a maximum of £110,000 per business.

 

This discount should be automatically administered by local authorities.

As well as this new business rate discount, an increase in business rate multipliers has been paused for 2022/23.

 

Additional UK tax information for 2022/23


  • The capital gains tax allowance stays at £12,300 for individuals, and £6,150 for trusts - the rates will also remain the same.
  • Corporation tax stays at 19 per cent, although it will increase in 2023 for larger businesses.
  • Other allowances remain the same, including the dividend tax allowance at £2000, the Individual Savings Account (ISA) allowance at £20,000, and there's no changes to tax on savings interest
  • Fuel duty has been reduced by 5p per litre.
  • As announced in the Spring Statement, Employment Allowance has increased from £4,000 to £5,000.

 

If you have any queries or would like to discuss anything mentioned in this blog, feel free to contact us!

 

We offer a free 30-minute phone consultation - call us on 07762657277.

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