New Tax Year: Changes to know about
This week marked the start of the new tax year. Here are the changes to the National Minimum Wage and National Insurance that came into effect on the 6th April.
Changes to the National Minimum Wage
The UK national minimum wage sets out the least a worker can be paid per hour by law.
There are two types:
· the National Living Wage applies to workers over the age of 23
· the National Minimum Wage applies to workers above school leaving age but under 23
The levels for both - along with the apprentice rate - usually increase every April.
Any employer not paying the minimum wage can be fined by the UK tax authority, HMRC.
The minimum wage increases took effect from 1 April:
· National Living Wage for over-23s: from £8.91 to £9.50 an hour
· National Minimum Wage for those aged 21-22: from £8.36 to £9.18
· National Minimum Wage for 18 to 20-year-olds: from £6.56 to £6.83
· National Minimum Wage for under-18s: from £4.62 to £4.81
· The Apprentice rate: from £4.30 to £4.81
The apprentice rate applies to people aged under 19, or people over 19 but in the first year of their apprenticeship.
If apprentices are older than 19 and have finished the first year of their apprenticeship, they are entitled to the relevant minimum wage for their age group.
The minimum wage is the same across all parts of the UK.
Changes to National Insurance
From the 6th April, employees, employers and the self-employed will all pay 1.25p more in the pound for National Insurance contributions.
From April 2022, anyone earning more than £9,880 a year will pay 1.25p more in the pound – however, this threshold will increase to £12,570 from July 2022.
This means that anyone earning less than £34,000 will pay less National Insurance than in the 2021/22 tax year, while those earning above this amount will pay more.
Changes to Employee Allowance
Employment Allowance is a relief that allows small businesses and charities to reduce the impact of their National Insurance contributions. The change for the 2022/23 tax year is an increase in help from £4,000 to £5,000. This allows small businesses to reclaim up to an extra £1,000 to help with business costs.
Today's blog has outlined some of the changes to the National Minimum Wage, National Insurance contributions and Employee Allowance as a result of the new tax year. Is your business ready to take on the changes?