Accountants in Belfast explain : On 6th July 2022, employees in Northern Ireland can now earn more money before they start paying National Insurance contributions as the tax threshold has increased.
Employees can now earn £12,570 a year before paying National Insurance. This figure is up £2,960 from last year’s value of £9,880. This is great news for workers earning less than about £34,000, as this change will more than offset the earlier 1.25p NI increase that came into effect in April 2022.
Hopefully this move will help ease the cost-of-living crisis for those struggling with bills and rising costs. The chancellor has said seven in 10 workers who pay national insurance contributions (NICs) will pay less.
How much will my salary increase in Northern Ireland?
BBC News claims that an employee earning £20,000 a year will pay around £178 less National Insurance in 2022-23 than they did the previous tax year.
The team RB Chartered Accountants in Belfast explain that it’s a straightforward process to ascertain how this change will affect your take home pay. If you enter your annual salary in this online tool on the government’s website, you will see your estimated tax savings.
As Chartered Accountants in Belfast, we would urge business owners to use this increase as a positive news story and to alert their staff members of the upcoming changes, as this may have a direct impact on their monthly wage packet.
It is evident that businesses are facing financial challenges right across the board. With the recent news of inflation passing 9% in May 2022, it is important that business owners take time out to carefully consider how to respond to these challenges as this will undoubtedly have a direct impact on the health of our economy.
How does this affect self-employed people?
RB Chartered Accountants in Belfast explain that these changes could allows self-employed people to keep more of their hard-earned income before NI is automatically deducted. These changes combined with other recent tax updates mean that the savings to some business owners could be significant if they update policies and seek professional advice.
However, with everyday prices such as food and fuel rising sharply, some households may not feel better off in practice, even with more money in their pay packet. Entrepreneurs and self-employed people must update the way that they pay themselves to take advantage of the change, this won’t happen automatically. Currently, the most tax-efficient way for directors working through a limited company to maximise their earnings is through a blend of salary and dividends, and this NI change means the blend should be updated to reflect the greater threshold and tax-free allowance.
As Chartered Accountants in Belfast, what is our advice?
Now is the time for businesses to introduce measures to help mitigate the impact of these changes. At RB Chartered Accountants, we can advise on a wide range of measures to assist both yourself and your business. Contact a member of our team today to discuss more about how we can help you create these efficiencies through a no-obligations chat.