Recent Tax Changes

Practical Accountancy with Allchurch & Co

We wanted to share the recent tax changes, unfortunately these aren’t favourable changes for taxpayers after a difficult 18 months. However, we believe it is important you are aware of the changes and the financial impact that it will have on you and your business. As always if you wish to discuss further please get in touch. With the self-assessment deadline on the horizon, please don’t leave it last minute to complete your return.

The Prime Minister recently announced national insurance contributions and dividend tax rates will increase by 1.25 percentage points across the UK from April 2022, with the projected £12bn annual income to be ring-fenced to pay for health and social care.

The Prime Minister has confirmed that rates of national insurance are to be increased to pay for the impact of the coronavirus pandemic on the NHS and to address the long-standing funding gap for health and social care.

From 1 April 2022, there will be a temporary 1.25% increase in class 1 (employee) and class 4 (self-employed) national insurance contributions (NIC) paid by workers, as well as a 1.25% increase in class 1 secondary NIC paid by employers (so 2.5% in total). The 1.25% increase will also apply to class 1A and class 1B NIC paid by employers.

The increase will apply to employed (include deemed employees) and self-employed indivi-duals and partners earning above the class 1 primary threshold / class 4 lower profits limit (currently £9,568 in 2021/22). Employers will pay the additional 1.25% for employees earning above the class 1 secondary threshold (current-ly £8,840 in 2021/22).

From April 2023, the increases will be legis-lated separately as a “health and social care levy” and NIC rates will return to 2021/22 levels. From that date, the legislation will also extend the revenue raising measure to indivi-duals over state pension age in employment or self-employment, who are currently exempt from paying NIC.

Alongside the levy, which will be paid by employees, the self-employed and businesses, the government has announced a 1.25% increase in dividend tax rates from 1 April 2022, taking rates to: 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers and 39.35% for additional rate taxpayers. The £2,000 dividend allowance will remain.

The increase in dividend tax rates will be legislated for in the next Finance Bill and the government estimates that 70% of the revenue raised will be paid for by additional and higher rate taxpayers in 2022/23.

Self-Assessment tax returns

Self-assessment is designed for individuals to complete. However, some people prefer to appoint an accountant to prepare theirs on their behalf. Missed deadlines or payments will result in penalties so please ensure you under-stand the deadlines and your responsibilities. If you need to change your return for whatever reason, then we can help with amended returns.

The advantage of using our services to sub-mit your self-assessment is we offer a timely and professional service. It can take the stress out of the task; we also become your agent to deal with matters with HMRC. We may be able to save you tax if you are unaware of allow-ances/deductions that are relevant to you. Finally, we will be ensuring all clients are sup-ported when making tax digital for income tax becomes a requirement from April 2023.

Allchurch & Co. Chartered Accountants / www.allchurchco.com / info@allchurchco.com /01792 439438

 

 

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