Budget 2021: Employment Tax Changes

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 (%)
0	n/a	1	2	2	2
1–50	>130	2	2	2	2
1–50	70–129	5	5	5	5
1–50	40–69	8	8	8	8
1–50	30–39	12	12	12	12
1–50	<30	14	14	14	14
51–54		15	15	15	15
55–59		16	16	16	16
60–64		17	17	17	17
65–69		18	18	18	18
70–74		19	19	19	19
75–79		20	20	20	20
80–84		21	21	21	21
85–89		22	22	22	22
90–94		23	23	23	23
95–99		24	24	24	24
100–104		25	25	25	25
105–109		26	26	26	26
110–114		27	27	27	27
115–119		28	28	28	28
120–124		29	29	29	29
125–129		30	30	30	30
130–134		31	31	31	31
135–139		32	32	32	32
140–144		33	33	33	33
145–149		34	34	34	34
150–154		35	35	35	35
155–159		36	36	36	36
160+		37	37	37	37

⁽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 (%)
0	N/A	1	2	2	2
1–50	>130	1	2	2	2
1–50	70–129	4	5	5	5
1–50	40–69	7	8	8	8
1–50	30–39	11	12	12	12
1–50	<30	13	14	14	14
51–54		14	15	15	15
55–59		15	16	16	16
60–64		16	17	17	17
65–69		17	18	18	18
70–74		18	19	19	19
75–79		19	20	20	20
80–84		20	21	21	21
85–89		21	22	22	22
90–94		22	23	23	23
95–99		23	24	24	24
100–104		24	25	25	25
105–109		25	26	26	26
110–114		26	27	27	27
115–119		27	28	27	27
120–124		28	29	29	29
125–129		29	30	30	30
130–134		30	31	31	31
135–139		31	32	32	32
140–144		32	33	33	33
145–149		33	34	34	34
150–154		34	35	35	35
155–159		35	36	36	36
160–164		36	37	37	37
165–169		37	37	37	37
170+		37	37	37	37

⁽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:

Period	Workers aged 23 plus	Workers aged at least 21 but under 23	Workers aged at least 18 but under 21	Workers aged under 18	Apprentices aged under 19 or in the first year
	£	£	£	£	£
From 1 April 2022	9.50	9.18	6.83	4.81	4.81
From 1 April 2021	8.91	8.36	6.56	4.62	4.30

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

	Daily offset	Weekly offset
Period	£	£
From 1 April 2022	8.70	60.90
From 1 April 2021	8.36	58.52

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 limits	2021–22	2022–23
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 threshold	n/a	£481

Class 2 NICs

Rate	2021–22	2022–23
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

Rate	2021–22	2022–23
Class 3 rate (weekly)	£15.40	£15.85

Class 4 NICs

	2021–22	2022–23
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:

Rate	2021–22	2022–23
Up to the Lower Earnings Limit	0%	0%
Primary Threshold to Upper Earnings Limit	12%	13.25%
Above Upper Earnings Limit	2%	3.25%

Married women’s reduced rate:

Rate	2021–22	2022–23
Up to the Lower Earnings Limit	0%	0%
Primary Threshold to Upper Earnings Limit	5.85%	7.1%
Above Upper Earnings Limit	2%	3.25%

These rates apply to employers:

Rate	2021–22	2022–23
Below Secondary Threshold	0%	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/AUST	13.8%	15.05%

Class 4 NICs

	2021–22	2022–23
Below Lower Profits Limit	0%	0%
Lower Profits Limit to Upper Profits Limit	9%	10.25%
Above Upper Earnings Limit	2%	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.