Autumn Budget 2021: Changes to Self-Employment Taxes

The Autumn Budget was announced on 27 October 2021. Here is a summary of the HMRC changes affecting the self-employed, including class 1 and 4 national insurance.

Friendly Disclaimer: Whilst I am an accountant, I’m not your accountant. The information in this article is legally correct but it is for guidance and information purposes only. Everyone’s situation is different and unique so you’ll need to use your own best judgement when applying the advice that I give to your situation. If you are unsure or have a question be sure to contact a qualified professional because mistakes can result in penalties.

1. Income Tax Rates from 6 April 2022

As promised, income tax bands will remain unchanged from 6 April 2022. The current rates that will continue are:

  • Up to £12,570 0% (personal allowance)
  • £12,570 to £50,270 20% (basic rate)
  • £50,271 to £150,000 40% (higher rate)
  • Over £150,000 45% (additional rate)
Income Tax Rates 2022/2023

2. Class 2 National Insurance from April 2022

Class 2 national insurance, a flat rate amount payable by the self-employed on their business profits, for the 2022/2023 tax year are:

  • a flat rate of £3.15 per week once profits exceed the threshold of £6,725 per annum.

3. Class 4 National Insurance from April 2022

Increases to class 4 national insurance rates of 1.25% have been applied in accordance with the Chancellors promise to raise money to fund the NHS and social care. The new Class 4 rates for 2022/2023 will become:

  • 10.25% on profits between £9,880 and £50,270 and 3.25% thereafter.
self employed tax rates 2022 2023
Class 2 and Class 4 National Insurance 2022/2023

3. Class 1 National Insurance from April 2022

Both Class 1 employees and Class 1a employers national insurance rates have increased by 1.25% in line with the new taxation for the NHS. If you’re employed, then the rates from April 2023 are 13.25% between £190 to £967 per week, 3.25% thereafter. If you’re registered as an employer, then the class 1a national insurance rates on gross pay are 0% up to £175 per week and 15.05% thereafter.

Class 1 National Insurance 2022/2023

Related:

Taxes are changing! From April 2024 sole traders will need to report their earnings and pay tax on a quarterly basis. This is known as Making Tax Digital, which you can read more about in this guide to help you get prepared.

About Anita Forrest

Anita Forrest is a Chartered Accountant, spreadsheet geek, money nerd and creator of www.goselfemployed.co - the UK small business finance blog for the self-employed community. Here she shares simple, straight-forward guides to make self-employment topics like taxes, bookkeeping and banking easy to understand.