There have been some recent changes in respect of Employment Tax that may affect you and your business, and, in this post, we take a look at the main areas that you need to be aware of.
The scale of charges for working out the taxable benefit for an employee who has use of an employer provided car are normally announced well in advance. Most cars are taxed by reference to bands of CO2 emissions multiplied by the original list price of the vehicle. The list price is reduced for capital contributions made by the employee up to £5,000.
For fully diesel cars generally add a 4% supplement unless the car is registered on or after 1 September 2017 and meets the Euro 6d emissions standard.
The maximum charge irrespective of the fuel, is however capped at 37% of the list price of the car.
The rates announced for 2022/23 will remain frozen until 2024/25.
Employer provided fuel benefit
From 6 April 2022, the figure used as the basis for calculating the benefit for employees who receive free private fuel from their employers for company cars is increased to £25,300.
Employer provided vans and fuel
For 2022/23 the benefit increases to £3,600 per van and the van fuel benefit charge where fuel is provided for private use increases to £688.
Changes to the van benefit charge from April 2021 means that if the van cannot in any circumstances emit CO2 by being driven the cash equivalent is nil.
Employers’ National Insurance (NICs)
In September 2021 the government published its proposals for new investment in health and social care in England. The proposals will lead to a permanent increase in spending not only in England but also by the devolved governments. To fund the investment the government will introduce a UK-wide 1.25% Health and Social Care Levy based on the NIC system but ring-fenced for health and social care.
From April 2022 the Health and Social Care Levy Act provides for a temporary 1.25% increase to both the main and additional rates of Class 1, Class 1A, Class 1B and Class 4 NICs for 2022/23.
From April 2023 onwards, the NIC rates will revert back to 2021/22 levels and will be replaced by a new 1.25% Health and Social Care Levy.
Broadly, the new Health and Social Care Levy will be subject to the same reliefs, thresholds and requirements as NICs. However, the Levy (as opposed to the temporary increase in NICs for 2022/23) will also apply to those above State Pension age who are still in employment or are self-employed.
Existing reliefs for NICs to support employers will apply to the Levy. Companies employing apprentices under the age of 25, all people under the age of 21, veterans and employers in Freeports will not pay the Levy for these employees as long as their yearly gross earnings are less than £50,270, or £25,000 for new Freeport employees.
The Employment Allowance, which reduces employers’ Class 1 NICs by up to £5,000, will also be available for the employers’ liability to the Levy.
The Levy will be applied to those above State Pension age although this does not apply in respect of the temporary increase from April 2022. The Levy will not apply to Class 2 (a flat rate paid by many self-employed) and Class 3 (voluntary contributions for taxpayers to fill gaps in their contribution records).
The burden of the 1.25% increase falls on the shoulders of the employer, the employee and the self-employed as each will have higher contributions to make. Those with property income will be relieved that they are not being included in the Levy.
National Living Wage (NLW) and National Minimum Wage (NMW)
Following the recommendations of the independent Low Pay Commission, the government will increase the NLW for individuals aged 23 and over by 6.6% from 1 April 2022. The government has also accepted the recommendations for the other NMW rates to be increased.
From 1 April 2022, the hourly rates of NLW and NMW will be:
In total, the annual gross earnings of a full-time worker on the NLW will have increased by over £5,000 since its introduction in April 2016.