There were few surprises for payroll in the Chancellor’s Autumn Budget which was announced before Parliament on 27 October 2021.
The changes which affect payroll had been previously announced. However, HMRC confirmed the changes for the forthcoming tax year in a single document which sets out the rates and allowances etc for 2022/23.
The proposed income tax rates for 2022/23 will be included in the Finance Bill 2021-22 published on Gov.UK on 4 November 2021.
The new rates and allowances are discussed below and there is a link to the document known as Appendix A which contains all of the rates.
National Living Wage
The National Living Wage was introduced in 2016 and this minimum hourly rate applied to those aged 25 and over.
With effect from 1 April 2021 the qualifying age for NLW was lowered to age 23.
The Chancellor, Rishi Sunak confirmed in his Budget speech that the NLW will increase by 6.6% to £9.50 per hour from 1 April 2022. This will benefit over two million low paid workers.
National Insurance rates to increase
Employers were already aware of the new Health and Social Care levy to be introduced from 6 April 2022. This will initially be collected by increasing the national insurance rates by 1.25% from 2022/23 for one tax year and then revert the national insurance rates to the 2021/22 levels.
This means that employee’s (primary) contribution rates will be as follows:
|Category letter||2021/22PT to UEL/UST/AUST||2021/22Above UEL/UST/AUST||2022/23PT toUEL/UST/AUST||2022/23Above UEL/UST/AUST|
|A, H* & M**||12%||2%||13.25%||3.25%|
|C (over SPA)||Nil||Nil||Nil||Nil|
|Z (under 21 deferment)||2%||2%||3.25%||3.25%|
*H (apprentice under age 25) **M (under age 21) SPA – State pension age
The employer’s secondary NI rate will rise from 13.8% to 15.05% from 6 April 2022.
Employer’s (secondary) contribution rates will be as follows:
|Category letter||2021/22ST to UEL||2021/22Above UEL/UST/AUST||2022/23ST to UEL/UST/AUST||2022/23Above UEL/UST/AUST|
|C (over SPA)||13.8%||13.8%||15.05%||15.05%|
The increase to the NI percentage rates for 2022/23 will also apply to Class 1A and Class 1B which will increase from 13.8% to 15.05%.
The increase in NI will be replaced with a separate levy of 1.25% from 6 April 2023. The new levy will also be paid by workers over the state pension age (SPA) from 2023/24 onwards.
National Insurance Thresholds 2021 to 2023
|Tax year 2021 to 2022||Tax year 2022 to 2023|
|Weekly Lower Earnings Limit (LEL)||£120||£123|
|Weekly Primary Threshold (PT)||£184||£190|
|Weekly Secondary Threshold (ST)||£170||£175|
|Upper Earnings Limit (UEL)||£967||£967|
|Upper Secondary Threshold (UST) for under 21s||£967||£967|
|Apprentice Upper Secondary Threshold (AUST) for under 25s||£967||£967|
|Veterans’ Upper Secondary Threshold||£967||£967|
|Freeport Upper Secondary Threshold||N/A||£481|
Employment Allowance 2022/23
The Employment Allowance per employer continues to be up to £4,000 for 2022/23.
Tax and allowances
The government will set the charge for the income tax rates by including this in the Finance Bill 2021-22.
As previously announced on 3 March 2021 the proposed tax bands for 2022/23 are:
|Tax Year 2021/22||Tax Year 2022/23|
|Basic rate||£1 to £37,700||£1 to £37,700|
|Higher rate||£37,701 to £150,000||£37,701 to £150,000|
|Additional rate||Over £150,000||Over £150,000|
The UK rates are reduced by 10p in £1 for Welsh taxpayers and the Welsh rates are set by the Welsh Parliament and added to the UK rates.
The income tax rates and thresholds for Scottish taxpayers are set by the Scottish Parliament.
As an indication of timing, the Scottish Parliament set the income tax rates and bands for 2021/22 on 25 February 2021.
Here is a reminder of the current Scottish rates and thresholds for 2021/22:
|2021/22||%||Annual earnings |
above PAYE threshold £12,700
|Scottish starter tax rate||19%||Up to £2,097|
|Scottish basic tax rate||20%||£2,098 to £12,726|
|Scottish intermediate tax rate||21%||£12,727 to £31,092|
|Scottish higher tax rate||41%||£31,093 to £150,000|
|Scottish top tax rate||46%||Above £150,000|
The personal allowance for income tax will be frozen for 2022/23 at £12,700 which means that the emergency tax code for 2022/23 will continue to be 1270L. This applies to England, Scotland, Wales and Northern Ireland. However, some other tax allowances have increased (see below).
|Income limit for Personal AllowanceClawback over £100k is £1 in every £2||£100,000||£100,000|
|Marriage Allowance(transferable allowance)||£1,260||£1,260|
|Blind Person’s Allowance||£2,520||£2,600|
|Married Couple’s Allowance (born pre 6 April 1935)10% tax relief||£9,125||£9,415|
|Married Couple’s minimum Allowance10% tax relief||£3,530||£3,640|
|Income limit for Married Couple’s Allowance Clawback over income limit is £1 in every £2||£30,400||£31,400|
Increase to Normal Minimum Pension Age
The government proposes to increase the earliest age at which most pension savers can access their pensions. The normal minimum pension age is currently age 55 and it is proposed that this will increase to age 57 and will take effect from 6 April 2028. Legislation to increase the minimum pension age will be included in the Finance Bill 2021-22.
This document was published on the day of the Autumn Budget and provides the tax rates and allowances and NI rates for 2021/22 and 2022/23 and can be accessed here.