Changes to UK Tax: October 2022's Changes Explained

Changes to UK Tax: October 2022's Changes Explained

In April 2022, businesses and individuals began paying more tax as National Insurance rates rose by an extra 1.25%. The tax hike was planned to remain until April 2023, when it would be replaced by a new Health and Social Care Levy of the same amount (1.25%). In a bid to ease the strain on the cost of living in the UK, the government has announced a repeal in the Health and Social Care Levy and has set a date for the National Insurance increases to be revoked.

Changes in leadership have caused some decisions set out in a ‘mini-budget’ to be reversed, causing confusion as to what policies still remain. The good news is, the 1.25% reduction in National Insurance has been retained. Read on for more details and a summary of which Tax changes have been axed and which ones will remain.

When will the changes come into effect?

Although the Health and Social Care Levy had been announced, it wasn’t due to come into effect until April 2023. It has been confirmed that this will no longer take place. Also confirmed in the government’s Growth Plan was a reduction of 1.25% in National Insurance from the 6th of November 2022. This will restore National Insurance levels to the rate they were at before April 2022’s tax increase.

How much will I save?

The amount an employee will save depends on how much they earn annually. Only workers earning over £12,570 a year pay National Insurance, and the more you earn thereafter determines how much you pay. The average taxpayer will save £330 per financial year, with average savings of £135 for the remainder of this financial year.

Businesses will also benefit from the tax cut to the tune of approximately £10,000 per year on average.

What other changes were retained?

Alongside the decision to reverse last April’s National Insurance increase, the government have maintained their decision to keep the stamp duty threshold at £250,000, or £425,000 for first-time buyers.

What other changes were cancelled?

By and large, the majority of changes to UK tax set out in the government’s mini-budget have now been reversed. These are:

• The cancellation of planned corporation tax increases has been reversed, meaning it will rise from 19% to 25% on 1st April 2023.

• The basic rate of income tax will remain at 20% instead of 19%, while higher earners (over £150,000) will continue to pay 45% instead of a planned 40%.

Will the scrapping of the Levy result in a cut to Health and Social Care funding?

According to the government, funding for health and social care services will remain the same as if the Levy were in place, with funding instead coming from general tax.

Looking to outsource your payroll? Finesse Resources specialises in delivering payroll services to businesses of all sizes throughout the UK. Find out 10 reasons why you should consider outsourcing or get in touch with one of our experienced team.