Here are some highlights regarding key tax changes for the new tax year.
The Government first announced increases to NI in September 2021, and for the 2022-23 tax year there is an additional 1.25%. Tax on dividends has also increased by that amount, from 7.5% to 8.75%.
After 2022-23, the NI rates will return to their previous levels. However, a new health and social care levy of 1.25% will be applied to people’s income to provide extra NHS and social care funding. This takes effect amid criticism to scrap the plan to help people struggling with rising costs of living.
Therefore, employees will be taxed at 13.25% on earnings up to the upper earnings threshold of £50,270.
Employers will pay Class 1 secondary contributions to HMRC as part of their PAYE bill of 15.05%, up from 13.8%.
However, to mitigate the impact, the point at which people pay NI will increase by £3,000 to £12,570 in July 2022, which is £2,700 more than originally planned and equal to the personal income tax allowance. The delay to July is to give software providers and employers time to adjust their processes.
According to the Government in the Spring Statement 2022 Personal Tax Factsheets, 70% of NI contributors will pay less because of this move.
The temporary 12.5% VAT rate for hospitality ended on 1 April 2022, bringing an end to the support eligible businesses saw through relaxed VAT rates during the pandemic.
In July 2020, the Government introduced a reduced VAT rate for hospitality, hotel and holiday accommodation from 20% to 5%.
It was extended and then increased to 12.5% for a transition period to officially end on 31 March 2022.
However, VAT on energy-saving materials, such as solar panels and heat pumps, will be decreased from 5% to 0% from April 2022 to 31 March 2027.
Green relief for business rates
At Autumn Budget 2021, the Government announced the introduction of targeted business rate exemptions from April 2023 to March 2035 for eligible plant and machinery used in onsite renewable energy generation and storage.
It also announced a 100% relief for eligible low-carbon heat networks with their own rates bill to support the decarbonisation of non-domestic buildings.
The Government is now bringing these measures forward by a year and they will take effect in the 2022-23 tax year.
Tax Thresholds Remain Frozen
The Government seems keen to reduce the public deficit while avoiding direct tax changes, so one major tool they have is tax threshold freezes. As such, many tax thresholds remain frozen for the 2022-23 tax year and beyond.
For instance, the capital gains tax allowance remains frozen at £12,300 for individuals until 2026. As it will not rise with inflation, gains on the sale of a second home and shares that are not in an ISA are more likely to face a tax charge in the future.
The personal allowance for income tax (£12,570) also remains frozen, although a tax cut of the basic rate of income will be cut from 20% to 19% from 2024.
Both the inheritance tax nil rate (£325,000) and residential nil rate band (£175,000) are also frozen for the next four years, as is the pensions lifetime allowance of £1,073,100.
With rising house prices, it\’s therefore likely a lot more estates will be caught in the inheritance tax net.
This is a summary and is not to be taken as a thorough list of all the changes and tax implications for you or your business in 2022-23. For further or more specific detail, get in touch with us by emailing email@example.com or phoning the office on 020 8446 8100.