State pension increases to tax hikes – 7 changes to be aware of in 2022
Budget 2021: Sunak announces National Living Wage increase
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There are multiple tax hikes, bill caps, wage changes and increases due throughout 2022 and while some may not be in consumers’ favour, a little preparation could potentially offset any negative effects. Additionally, it’s not all bad news but savers and spenders should be clued up on what they are entitled to so they can ensure they aren’t being shortchanged.
National Living Wage
One change that has already made the headlines is the increase in National Living Wage.
From April 2022 it will increase from £8.91 to £9.50 per hour for those over age 23, seeing weekly earnings rising to £356.25 for an average 37.5 hour work week.
Workers aged 21 and over will see their earnings rise to £9.18 per hour and those between 18 and 20 will earn a minimum of £6.83.
Employees under the age of 18 and apprentices will be receiving £4.81 per hour.
Energy price cap
Energy prices have been a concern for many this winter and as more suppliers fold under the pressure it does appear that more rises are coming.
Although the exact amount it will increase by is undecided, most experts estimate it to be between £150 and £400.
The price cap will be announced in February 2022 before coming into effect in April.
Council tax rates
Council tax bills were raised by £7 per month in 2021 and as the social care and health impact of the pandemic continues to spread, it’s fair to expect another increase in 2022.
AJ Bell estimates that the annual amount could reach £1,951 for an average Band D property but this is expected to vary according to councils.
Certain income thresholds for allowances have been frozen, which could see Brits paying more taxes in the coming year.
These allowances include:
- Personal allowance
- Pensions lifetime allowance
- Capital Gain Tax allowance
- ISA Allowance
- JISA Allowance
- Inheritance tax threshold
- Dividend Allowance
Brits have been consistently hit this year by higher than expected inflation rates, with some experts estimating as much as six percent next year.
The current inflation rate is believed to be the main reasoning behind the Bank of England’s decision to raise the base interest rate.
The increase for state pension and other benefits has been announced at 3.1 percent.
This is aligned with the CPI inflation rate when the increase was announced, and the suspension of the triple lock saw pensioners miss out on a potential eight percent increase.
Basic state pension rates will increase by £4.25 per week and the new state pension will rise by £5.55.
National Insurance rate rise
Another announcement that caused a commotion among the British public was the National Insurance hike as part of the Government’s plan to cover the cost of the NHS and adult social care.
The 1.25 percent increase will see those earning between £9,569 and £50,270 per year paying 13.25 percent.
However, those earning above £50,270 will be paying an increased rate of 3.25 percent.
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