Hip, Hip, Hooray, Hip, Hip, Hooray

Tax and NI both starting at £12,570

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Did I hear right, has Rishi finally done something clever?

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By Wanderer
23rd Mar 2022 13:22

Why did he say from July though?

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Replying to Wanderer:
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By SXGuy
23rd Mar 2022 13:25

I couldn't figure that out either. Why July and not April? What happens in between then.

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Replying to SXGuy:
paddle steamer
By DJKL
23rd Mar 2022 13:29

Some tax planning re timing of bonuses, perhaps.

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Replying to SXGuy:
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By Wanderer
23rd Mar 2022 13:31

Presumably annual earnings period for directors?

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Replying to SXGuy:
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By Catherine Newman
23rd Mar 2022 14:37

Probably too late for the software houses to re-program for April.

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Replying to Wanderer:
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By Paul Crowley
23rd Mar 2022 13:31

Because the sofware houses were not told
I have wages to get done first week of April

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Replying to Paul Crowley:
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By Wanderer
23rd Mar 2022 13:33

Wouldn't be much of an update I would have thought. In the bad old days of Sage payroll I remember you had to input the various break points manually. Glad that's gone with modern software.

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Replying to Wanderer:
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By Calculatorboy
23rd Mar 2022 20:35

On the positive side by inputting parameters and rates manually you didnt have to pay for annual updates , it was a once only purchase ...unless there was a complete change in tax methodology.

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Replying to Wanderer:
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By Calculatorboy
23rd Mar 2022 20:34

On the positive side by inputting parameters and rates manually you didnt have to pay for annual updates , it was a once only purchase ...unless there was a complete change in tax methodology.

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Replying to Paul Crowley:
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By Ken Howard
23rd Mar 2022 13:44

Can't imagine it's much of a job for software firms to change a threshold. It's not as if there are new thresholds/rates to change, just changing a figure in a table in the program.

After all, in the days pre computers, it was common for tax/nic changes announced in the Budget (Feb or Mar) to start early May, so if they could do all the printing of tables, posting out etc back then in time, (not to mention the software for the big employers who used them), we seem to be going backwards in terms of technology if the "run in" period for such changes is now longer than it was 20/30 years ago!

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Replying to Ken Howard:
Morph
By kevinringer
24th Mar 2022 13:01

I think it would be more of an upheaval for software to change NI thresholds mid-year because I suspect most software is hard-wired for a 6 April change. In the past the Budget was in Feb/Mar and the new NI started 6 April. In pre-computer days HMRC would have to print all the tables and distribute them to employers. It was all done then so why not now? I think the delay to July is going to cause all sorts of problems. Have we had a mid-year change of NI before?

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Replying to kevinringer:
RLI
By lionofludesch
24th Mar 2022 14:03

kevinringer wrote:

I think it would be more of an upheaval for software to change NI thresholds mid-year because I suspect most software is hard-wired for a 6 April change. In the past the Budget was in Feb/Mar and the new NI started 6 April. In pre-computer days HMRC would have to print all the tables and distribute them to employers. It was all done then so why not now? I think the delay to July is going to cause all sorts of problems. Have we had a mid-year change of NI before?

Yes. I can remember new NI tables being issued for a 1 October change back in the 1980s.

I don't see a problem. You pay the NI based on your pay in the pay period. If you get paid after June, you'll pay less NI. Folk need to think about that. There's a planning opportunity, albeit limited.

Directors will still have an annual pay period so there are less planning opportunities. They just need to reconsider their rate of pay.

What problem do you foresee which wouldn't apply to a 6th April rate change ?

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Replying to lionofludesch:
Morph
By kevinringer
24th Mar 2022 21:17

Main problems are (1) employees have to wait longer to benefit whereas fuel increases are hitting now and (2) I suspect it's more hassle for software suppliers and (3) why do we have to wait until July?

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Replying to kevinringer:
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By Catherine Newman
24th Mar 2022 17:44

And I remember. It was by post.

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By Brads.Kings
23rd Mar 2022 13:25

Secondary threshold?

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Replying to Brads.Kings:
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By Wanderer
23rd Mar 2022 13:28

Wasn't mentioned.

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Replying to Wanderer:
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By Paul Crowley
23rd Mar 2022 13:33

Probably because there is no relaxation on the employer
And upper limit raised as well

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Replying to Brads.Kings:
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By jeremybarker
25th Mar 2022 16:01

Only the Primary Threshold (and Lower Profits Limit for Class 4 NI) changes according to the Spring Statement 2002 Factsheet on Personal Tax says. PT goes up to £242 a week/£1,048 a month from 6 July. The LPL is actually £11,908 to account for 13 weeks at £9,880 a year and 39 weeks at 12,570 a year. You can find the Factsheet at: https://www.gov.uk/government/publications/spring-statement-2022-factshe...

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By justsotax
23rd Mar 2022 13:29

probably software update - giving providers time to get on board.....lets see how long that alignment lasts....I give it 2 years max....

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Replying to justsotax:
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By Paul Crowley
23rd Mar 2022 13:34

Same here
If only it could be kept simple

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Replying to justsotax:
paddle steamer
By DJKL
23rd Mar 2022 13:37

Could be the first step towards joining them into one tax that applies to all (except to dividends, of course, this is the Tories).

Landlords effectively paying NI, now that would be a vote winner (though need an out on age for the retired)

I personally am awaiting the special company tax rate on residential rentals to punish all who incorporated their BTL.

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Replying to DJKL:
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By jndavs
23rd Mar 2022 14:04

Dividends - the company has already paid CT.

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Replying to jndavs:
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By Paul Crowley
23rd Mar 2022 14:36

But not NI
And unlike other countries, no withholding tax when dividends paid out

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Replying to Paul Crowley:
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By jndavs
23rd Mar 2022 14:54

You can debate whether dividends should be subject to NI.
Withholding tax - maybe for the differential between CT & IT rates.
I was highlighting the fact that shareholders have already suffered tax on their distributions.

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By jonharris999
23rd Mar 2022 13:40

Isn't that going to stop a whole load of folk racking up their 35 years' full contribs for full pension etc?

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Replying to jonharris999:
paddle steamer
By DJKL
23rd Mar 2022 13:44

Possibly, maybe from now on you will have to actually pay to get a state pension.

Will await the dust settling, anyone had a look to see what HMRC have put out?

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Replying to jonharris999:
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By justsotax
23rd Mar 2022 13:46

you could be onto something.....wonder if the lower earnings threshold will align with the starting rate......will take a whole lot of people paid below the PA out of getting state pension credits.....quite sneaky.....wouldn't be surprised.

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Replying to justsotax:
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By I'msorryIhaven'taclue
23rd Mar 2022 14:18

No mention of the (currently) £520 pm LEL, above which level an employee is presently credited with notional Class 1 NI payments.

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Replying to I'msorryIhaven'taclue:
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By rmillaree
23rd Mar 2022 15:13

I think there would be mass mutiny if the peeps who love working 16 hours and no more didn't qualify for their full state pension on their 16 hours . Presumably even the sunni is not mad enough to annoy that voter segment.

Note this comment is somewhat tongue in cheeck :)

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Replying to jonharris999:
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By Paul Crowley
23rd Mar 2022 14:40

The little tiny limit of 533 per month probably not changed
But who knows?
Real details will follow later

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Replying to jonharris999:
RLI
By lionofludesch
23rd Mar 2022 15:05

jonharris999 wrote:

Isn't that going to stop a whole load of folk racking up their 35 years' full contribs for full pension etc?

Difficult to say without knowing the detail. If the change is only to the starting point of where you actually pay, no, pension entitlement is unchanged.

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Replying to jonharris999:
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By jeremybarker
25th Mar 2022 16:08

Pension entitlement depends on the NI contribution record, not how much you pay in NI. A week/month is added to the contribution record when pay is at or above the Lower Earnings Limit (£123 a week from 6 April) but the NI contribution rate is 0% until pay exceeds the Primary Threshold (£190 a week from 6 April to 5 July and £242 a week thereafter). The change means that a lot more people will add to their NI contribution record without paying anything.

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Stepurhan
By stepurhan
23rd Mar 2022 13:40

Even a stopped clock is right twice a day.

I won't celebrate until I see the detail.

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paddle steamer
By DJKL
23rd Mar 2022 13:50

"Spring Statement announces an increase in the annual National Insurance Primary Threshold and the Lower Profits Limit from £9,880 to £12,570 from July 2022, to align with the income tax personal allowance. This is a tax cut of over £6 billion and worth over £330 for a typical employee in the year from July. Around 70% of National Insurance contributions (NICs) payers will pay less NICs, even accounting for the introduction of the Health and Social Care Levy. This change will take 2.2 million people out of paying Class 1 and Class 4 NICs and the Health and Social Care Levy altogether. It brings into alignment the starting thresholds for income tax and NICs, making the taxation of income fairer, and these thresholds will remain aligned."

https://www.gov.uk/government/publications/spring-statement-2022-documen...

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paddle steamer
By DJKL
23rd Mar 2022 14:27
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paddle steamer
By DJKL
23rd Mar 2022 14:35

NI Statement- self employed re 2022/23 do not get full £12,570 but £11,908

https://www.gov.uk/government/publications/national-insurance-primary-th...

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Replying to DJKL:
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By lionofludesch
23rd Mar 2022 14:40

To be fair, the employed won't get it this year either, because the increase doesn't kick in until July.

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Replying to DJKL:
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By Ian Lawrence
23rd Mar 2022 17:27

Is a director’s primary threshold for the year also £11908 in 21/22? In which case our salary recommendations change where the employer allowance is covering the ers NI?

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Replying to Ian Lawrence:
RLI
By lionofludesch
23rd Mar 2022 17:42

Ian Lawrence wrote:

Is a director’s primary threshold for the year also £11908 in 21/22? In which case our salary recommendations change where the employer allowance is covering the ers NI?

Great question. Who knows ?

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Replying to lionofludesch:
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By rmillaree
23rd Mar 2022 18:06

Seems reasonably certain they will do that for consistency purposes - hmmmm is anything reasonably certain when it comes to what hmrc will do next - probably not.

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Replying to rmillaree:
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By lionofludesch
23rd Mar 2022 18:13

rmillaree wrote:

Seems reasonably certain they will do that for consistency purposes - hmmmm is anything reasonably certain when it comes to what hmrc will do next - probably not.

Directors have an annual earnings period so, thinking about it, I expect it will be three of one + nine of the other.

[Pity the change wasn't in October and then I could've said six of one and half a dozen of the other.]

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Replying to Ian Lawrence:
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By Catherine Newman
23rd Mar 2022 18:13

Employers Allowance only applies if there are two people on the payroll. Are you claiming it for entities when you shouldn't be? If there is a sole director Employers Allowance doesn't apply.

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Replying to Catherine Newman:
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By Ian Lawrence
23rd Mar 2022 18:23

No of course not

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Replying to Catherine Newman:
All Paul Accountants in Leeds
By paulinleeds
24th Mar 2022 13:54

"Employers Allowance only applies if there are two people on the payroll"

This is not true. The correct position is:

Employment Allowance applies if any employer's National Insurance is paid, subject to care, home, NHS and NI of £100,000 pa etc. However, if the only person on the payroll is a director then employer's NI cannot be reclaimed through the Employment Allowance.

The only time when employer's NI can be reclaimed through the Employment Allowance is where a second person, including a second director, has paid employer's NI, ie they are paid over the secondary NI limit at some time in the tax year.

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Replying to paulinleeds:
RLI
By lionofludesch
24th Mar 2022 14:13

paulinleeds wrote:

"Employers Allowance only applies if there are two people on the payroll"

This is not true. The correct position is:

Employment Allowance applies if any employer's National Insurance is paid, subject to care, home, NHS and NI of £100,000 pa etc. However, if the only person on the payroll is a director then employer's NI cannot be reclaimed through the Employment Allowance.

The only time when employer's NI can be reclaimed through the Employment Allowance is where a second person, including a second director, has paid employer's NI, ie they are paid over the secondary NI limit at some time in the tax year.

Or - you could have one employee who isn't a director.

Somehow overlooked in the excitement.

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Replying to lionofludesch:
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By Gone Sailing
12th Apr 2022 17:54

Yes the requirement for a second non-director employee paying ER's NI at least once in a year was often repeated in the early EA days, but it's not mentioned here:
https://www.gov.uk/claim-employment-allowance/eligibility

But of course this is not the legislative detail.

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Replying to Ian Lawrence:
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By neiltonks
24th Mar 2022 13:08

The director's annual threshold for 2022/23 is definitely £11908 according to the information supplied to software developers.

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Replying to neiltonks:
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By Ian Lawrence
24th Mar 2022 13:39

Thank you very much. In effect our £797 salaries move to £992 pcm from April 22

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Replying to Ian Lawrence:
All Paul Accountants in Leeds
By paulinleeds
24th Mar 2022 13:55

No, increase to £823 from 6 April 2022 and then to £1,048 from 5 July 2022, unless you want to pay NI before 5 July 2022.

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Replying to paulinleeds:
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By Ian Lawrence
25th Mar 2022 16:15

I was meaning director salaries so £992 should not cause a problem using the cumulative basis

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