National Insurance rates cut from 6 November 2022

On Thursday, the government announced in-year reductions to National Insurance rates and the cancellation of the Health and Social Care Levy as a separate tax. National Insurance contribution (NIC) rates will be cut by 1.25 percentage points for both employees and employers, reversing the increase introduced in April 2022.

This cut will take effect from 6 November 2022 and it will mean that Employee Class 1 NIC will reduce from 13.25% back to 12% whilst Employer NIC will reduce down from 15.05% to 13.8%.

The government also announced that the ring-fenced Health and Social Care Levy of 1.25% due to be introduced from April 2023 will also not go ahead.

Please do not hesitate to contact us if you have any queries with regards to this or any other payroll matter.

HMRC RELEASES MORE DETAILS MTD FOR INCOME TAX

HMRC has published more details on how Making Tax Digital for Income Tax (MTD for IT) will work for buy-to-let landlords and sole traders with qualifying income over £10,000.

The new income tax framework for MTD for IT will be mandatory from 6 April 2024. HMRC is now asking for users to sign up for the test phase.

The new system will replace self assessment tax returns for anyone who qualifies for MTD for IT as they will have to submit all non-qualifying income through the Personal Tax Account (PTA) system instead.

Anyone who qualifies will have to make quarterly submissions, and the new deadline for end of year statements will be 31 January after the end of each tax year.

HMRC will use data from self assessment tax returns to calculate qualifying income in the first instance and will contact all affected taxpayers directly to inform them that they fall under the mandatory MTD for IT rules.

HMRC states:

‘Your qualifying income is the combined income that you get in a tax year from self-employment and property income sources. We assess this before you deduct expenses (that is, your gross income or turnover).

‘All of your qualifying income must be reported through MTD compatible software.

‘All other sources of income reported through self assessment, such as income from employment, dividends or savings, do not count towards your qualifying income. You will need to report income from these sources using either your MTD compatible software (if it has the functionality) or HMRC online services account.’

Internet links: Using MTD for IT Check if you can sign up for MTD for IT

EXPERTS WARN INFLATION COULD KEEP RISING IN 2023

Economic analysts have warned that the rate of inflation could keep rising in 2023 as a result of rising energy prices.

Think tank the Resolution Foundation stated that inflation could go above 15%, whilst investment bank Citi said that it is ‘entering the stratosphere’ and could reach 18.6%.

Predictions outlined by the Bank of England (BoE) have suggested that inflation could rise to over 13% later this year.

Commenting on the matter, James Smith, Research Director at the Resolution Foundation, said:

‘Inflation has hit double digits earlier than expected off the back of the highest food price inflation in over two decades, and is set to continue climbing as energy bills soar this winter.

‘There is no escaping this cost-of-living crisis, with pay packets shrinking at their fastest pace since 1977 and low-income households facing the prospect of cutting back ‘non-essential’ spending by 25% to cope with energy bills of over £4,000 from January.’

Internet link: Resolution Foundation website