In the 2022/23 tax year there have been some significant National Insurance changes. From 6 April 2022 National Insurance contributions were increased by 1.25% to reflect the new Health and Social Care Levy. This will be a temporary National Insurance increase for 2022/23 to be replaced in April 2023 with the Health and Social Care Levy being separately charged.
Following the announcement in the Spring Statement, there were further announcements made that with effect from 6 July 2022 the National Insurance threshold would increase to be in line with the Personal Allowance. For a director, the amount above which employees national insurance will be payable in 2022/23 is £11,908.
Each year Bromhead undertake remuneration planning for their company director/shareholders. Historically, for those with no other sources of income, the optimum position has been to take a low salary and the balance as a dividend; typically a salary of approximately £755 per month with the remainder as dividend.
Following the National Insurance changes, some director/shareholders, can achieve an overall tax saving of up to £190 for 2022/23 by adjusting their salary. However, this is only the case where they are not fully utilising their Personal Allowance with their income sources, such as rental income or benefits in kind.
Unfortunately for those clients already utilising their Personal Allowance, there is no tax saving to be made by adjusting the salary for the new National Insurance limits announced and disturbing the current strategy would cost more in tax.
There will be some directors who aren’t fully utilising their Personal Allowance and therefore Bromhead will, in February/March 2023, as indeed we do each year when we undertake our remuneration planning for clients, review the position for those affected and suggest voting additional salary in March 2023.
As outlined above, there is no tax benefit if the Personal Allowance is fully utilised against other sources, hence our policy to review later in the tax year when full facts of other sources of income are known.
In addition to this, we do have a forthcoming change in Prime Minister. The approach to the political and taxation landscape does vary by candidate and undoubtedly there could be further announcements in the Autumn Budget to reflect the successful incoming Prime Minister’s policies.
Of course if you wish to discuss your personal affairs in the meantime, please do not hesitate to contact either the Director or Client Manager in charge of your affairs.