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Budget 2021: Employment Tax Changes

Gary Green
Gary Green
October 29, 2021

Chancellor Rishi Sunak laid out changes to employment taxes as part of his 2021 Budget, delivered on October 27. Here is everything you need to know...

Taxable benefits

Company car fuel benefit

The taxable benefit of free fuel provided for use in a company car is calculated using the same percentage as is used for calculating the company car charge (dependent upon the CO2 emissions of the vehicle). The percentage is applied to a fixed taxable benefit multiplier. From 6 April 2022, the multiplier is increased by £700, from £24,600 to £25,300.

Company car benefit

As originally announced in Budget 2020, company car tax rates will increase by 1% in 2022–23 and will then remain frozen for a further 2 years, until 2024–25.

Cars registered before 6 April 2020(1)

CO2 (g/km)Electric range (miles)2021–22 (%)2022–23 (%)2023–24 (%)2024–25 (%)
0n/a1222
1–50>1302222
1–5070–1295555
1–5040–698888
1–5030–3912121212
1–50<3014141414
51–5415151515
55–5916161616
60–6417171717
65–6918181818
70–7419191919
75–7920202020
80–8421212121
85–8922222222
90–9423232323
95–9924242424
100–10425252525
105–10926262626
110–11427272727
115–11928282828
120–12429292929
125–12930303030
130–13431313131
135–13932323232
140–14433333333
145–14934343434
150–15435353535
155–15936363636
160+37373737

(1) Add 4% for diesels up to a maximum of 37% (unless RDE2 compliant). The 4% diesel supplement does not apply to diesel plug-in hybrids irrespective of RDE2 compliance.

Cars registered on or after 6 April 2020(1)

CO2 (g/km)Electric range (miles)2021–22 (%)2022–23 (%)2023–24 (%)2024–25 (%)
0N/A1222
1–50>1301222
1–5070–1294555
1–5040–697888
1–5030–3911121212
1–50<3013141414
51–5414151515
55–5915161616
60–6416171717
65–6917181818
70–7418191919
75–7919202020
80–8420212121
85–8921222222
90–9422232323
95–9923242424
100–10424252525
105–10925262626
110–11426272727
115–11927282727
120–12428292929
125–12929303030
130–13430313131
135–13931323232
140–14432333333
145–14933343434
150–15434353535
155–15935363636
160–16436373737
165–16937373737
170+37373737

(1) Add 4% for diesels up to a maximum of 37% (unless RDE2 compliant). The 4% diesel supplement does not apply to diesel plug-in hybrids irrespective of RDE2 compliance.

Company vans and van fuel benefit

The taxable benefit of a company van made available for private use is a fixed scale charge. From 6 April 2022, the scale charge is increased by £100 from £3,500 to £3,600.

Similarly, the taxable benefit of private fuel provided for use in a company van is a fixed scale charge. From 6 April 2022, this scale charge is increased by £19 from £669 to £688.

Increased power to vary taxable benefits and expenses

Over the period of the Covid-19 pandemic, the Government has introduced a number of easements in respect of taxable benefits and expenses – for example exempting employer-provided coronavirus testing, relaxing the requirements to claim relief for working from home, and for qualifying journeys in respect of the cycle to work scheme, amongst others.

These measures each required separate new legal provisions, including both primary and secondary legislation, making the process cumbersome and in some cases resulting in delayed implementation. To resolve this issue in future, HM Treasury will be granted power (via ministerial direction) to make temporary regulations (lasting for a maximum of two tax years) in the event of a disaster or national emergency.

The power only extends to requirements in respect of taxable benefits, exemptions and allowable deductions, and can only be used to provide additional relief – it cannot be used to increase or create a tax charge.

National minimum wage/National living wage

It was announced that the Government has accepted the recommendations of the Low Pay Commission in full, and accordingly these new rates will apply from 1 April 2022:

PeriodWorkers aged 23 plusWorkers aged at least 21 but under 23Workers aged at least 18 but under 21Workers aged under 18Apprentices aged under 19 or in the first year
£££££
From 1 April 20229.509.186.834.814.81
From 1 April 20218.918.366.564.624.30

The maximum permitted daily and weekly rates of accommodation offset in relation to the national minimum wage are as follows:

Daily offsetWeekly offset
Period££
From 1 April 20228.7060.90
From 1 April 20218.3658.52

National Insurance contributions rates and thresholds

National Insurance thresholds for Class 1 and the rates of Class 2 and 3 contributions will be increased by Statutory Instrument for 2022–23, in line with the increase in the Consumer Prices Index (CPI).

The annual upper profits limit (for Class 4 NICs) and upper earnings limit (for Class 1 NICs) will be maintained at the 2021–22 level (£50,270), in line with the income tax higher rate threshold and will remain frozen until 2025–26. The Employment allowance remains at £4,000 per annum.

Class 1 NICs

Weekly Class 1 limits2021–222022–23
Lower earnings limit£120£123
Primary threshold£184£190
Secondary threshold£170£175
Upper earnings limit£967£967
Upper secondary threshold for under 21s (UST)£967£967
Apprentice upper threshold for under 25s (AUST)£967£967
Veterans upper threshold£967£967
Freeport upper thresholdn/a£481

Class 2 NICs

Rate2021–222022–23
Small Profits Threshold (annual)£6,515£6,725
Class 2 rate (weekly)£3.05£3.15
Share fishermen (weekly)£3.70£3.80
Volunteer development workers (weekly)£6.00£6.15

Class 3 NICs

Rate2021–222022–23
Class 3 rate (weekly)£15.40£15.85

Class 4 NICs

2021–222022–23
Lower Profits Limit (annual)£9,568£9,880
Upper Profits Limit (annual)£50,270£50,270

Health and social care levy

From April 2022, National Insurance contributions (Class 1 and 4) for working age employees, self-employed people and employers will increase by 1.25%, applicable throughout the UK. As announced on 7 September 2021, this will be known as the Health and Social Care levy. It will be formally separated from the NICs system from April 2023 (and NICs will return to their 2021–22 levels).

Class 1 NICs

These rates apply to employees and apprentices:

Rate2021–222022–23
Up to the Lower Earnings Limit0%0%
Primary Threshold to Upper Earnings Limit12%13.25%
Above Upper Earnings Limit2%3.25%

Married women’s reduced rate:

Rate2021–222022–23
Up to the Lower Earnings Limit0%0%
Primary Threshold to Upper Earnings Limit5.85%7.1%
Above Upper Earnings Limit2%3.25%

These rates apply to employers:

Rate2021–222022–23
Below Secondary Threshold0%0%
Below Upper Secondary Threshold (for employees under 21)0%0%
Below Apprentice Upper Secondary Threshold (for apprentices under 25)0%0%
Above Secondary Threshold/UST/AUST13.8%15.05%

Class 4 NICs

2021–222022–23
Below Lower Profits Limit0%0%
Lower Profits Limit to Upper Profits Limit9%10.25%
Above Upper Earnings Limit2%3.25%

Budget 2021 - Overview of Changes

Administration and Compliance Changes
Capital Gains Tax (CGT) Changes
Corporation Tax and Other Business Tax Changes
Customs and Excise Duties Changes
Employment Tax Changes
Personal Tax Changes
Property Tax Changes

If you have any questions about the issues raised in this article, we at Key Business Consultants can help. Get in touch with us today or call us directly on 020 3728 2848.

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