With New Year just around the corner, now is a great time to start preparing your finances for 2022!
Even though we may still be in 2021, a number of personal finance changes have already been set in stone for next year. Understanding the changes that are on the way could help you to get a head start on your finances and prepare for what’s to come.
Here are the personal finance changes that you can expect to see in 2022 and how to prepare for them.
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Times are changing in 2022!
While the Christmas season may have encouraged you to relax a little with your finances, we could be in store for some significant changes in the New Year. Several swaps are set to take place that could see taxes increase and pensions change. Here are the five biggest financial changes that you will see in 2022.
1. National Living Wage will increase
To start on a positive note, the National Living Wage in the UK is set to shoot up in 2022. The pay rise will take effect in April and will see over 23’s receiving £9.50 per hour, instead of £8.91. The lowest rate of pay, which is received by 16 and 17-year-olds, will increase from £4.62 to £4.81 per hour.
If you currently work a National Living Wage job, be sure to check that your employer has paid you correctly when the changes take place. It may also be worth thinking about placing the extra into a savings account to make the most of the wage increase.
2. Council Tax rates will go up
In 2022, Council Tax is expected to soar. This is due to the fact that councils are in need of extra cash to fund projects in the new year. How much the rates will increase is not yet set in stone. However, homeowners should prepare to receive higher bills next year.
3. Interest rates could rise
Another positive change that is heading our way in 2022 is the likely rise of bank interest rates. After a sore year for many savings accounts, 2022 could see interest rates rise by up to 1%!
To benefit from this change, keep a lookout for savings accounts with improved rates and consider moving to one of these. The interest rate increase may not apply to every bank or savings account in the UK. Also, some savers may be better off sticking with their current savings account if their rates are already high.
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4. The State Pension will increase
If you receive the State Pension, you could be in for a treat in 2022! The old State Pension rate is set to rise by £4.25 per week next year, which equates to around £221 per year. As well as this, the new State Pension rate will surge by £5.55 per week from £179.60 to £185.15.
These increases are lower than initially expected. This comes as a result of the triple lock being suspended, which has taken its toll on pension rates. Nevertheless, any increase will be a welcome boost to those receiving the State Pensions.
5. National Insurance will go up
The pandemic has created a huge need for social care around the UK. As a result, National Insurance is set to increase in 2022. It is hoped that funds raised by the increase will help to pay for more adult social care.
National Insurance will rise by 1.25%, from 12% to 13.25% on earnings between £9,568 per year and £50,270 per year. For earnings above £50,270, the rate will rise from 2% to 3.25%. Consequently, UK workers should prepare for higher National Insurance bills in the coming year.
It is also worth checking that you pay the right amount once the changes have been made to avoid any problems in the future.
Please note that tax treatment depends on your individual circumstances and may be subject to change in the future. The content in this article is provided for information purposes only. It is not intended to be, nor does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
