Autumn Statement 2022: What does it mean for employers and employees?
Taxes paid by employees and employers accounts for the majority of Government tax revenues. It is therefore unsurprising to see a number of measures announced today by the Chancellor. We have set out more detail below.
Income tax and NIC thresholds
Income tax thresholds had already been frozen until April 2026 but this freeze has been extended by two years to April 2028. The Chancellor also announced that the threshold over which individuals are subject to the additional rate of income tax (45%) will reduce from £150,000 to £125,140 from April 2023.
The threshold at which workers start paying NICs and the threshold at which employers start to pay NICs will be fixed until April 2028. There is however some relief for employers as the employer allowance will remain at £5,000 until April 2026.
As wages continue to grow, employees will undoubtedly notice the impact of these threshold freezes in real terms, as will employers. The additional rate change will need to be considered as part of the Pay-As-You-Earn employee tax collection system.
Electric vehicles (EVs)
As widely expected, given the increasing popularity of electric vehicles, the Chancellor confirmed today that the benefit in kind (BIK) charge on EVs of 2% will remain in place until 2025 but will then increase by 1% each year until it reaches 5% in 2027/28. Despite the increase, EVs will still generate a considerably lower BIK value than petrol or diesel powered vehicles. EVs are specifically excluded from the optional remuneration arrangements legislation, meaning salary sacrifice still offers considerable tax and NIC savings for employees and employers.
One factor that will likely lead to increased costs for employers providing EVs to its employees, however, is the introduction of vehicle excise duty on electric cars from April 2025.
National Living Wage (NLW) and National Minimum Wage (NMW)
It will be welcome news for employees paid the NLW or NMW that the Chancellor has announced increases to both from April 2023. The NLW will increase by approximately 10% to £10.42.
Autumn Statement 2022
Analysis and commentary from the experts at Evelyn Partners, identifying the key tax changes and outlining the practical implications for you and your business.