As we are now part way through the 2022/23 tax year, I thought it would be a good time to remind you of some Government announced tax changes that have either recently taken effect, or will be coming in shortly, as follows:
National Insurance – from 6 April 2022 the rate of NI increased by 1.25%. The Government have stated that this increase is ring fenced for the NHS health and social care in the UK, and it applies to employees, employers and the self-employed.
National Insurance – as a slight concession to the rate increase, the Government further announced an increase to the primary threshold above which NI contributions start to be paid, from £9,880 to £12,570. However, this takes effect from July 2022 so there is a time lag from the NI rate increase.
National Insurance – a further small concession for eligible employers is the increase in the annual Employment Allowance from £4,000 to £5,000 from April 2022.
Dividend tax – whilst the first £2,000 dividend per annum remains taxed at 0%, from 6 April 2022 any additional dividends see an increase in the tax rate of 1.25%. As a result a basic rate taxpayer will suffer dividend tax of 8.75%, higher rate 33.75% and additional rate 39.35%.
Corporation Tax – there will be an increase in the main rate of corporation tax on company profits from 19% to 25% taking effect in April 2023, on a sliding scale for profits between £50,000 and £250,000. In between these profit levels a marginal rate of tax between 19% and 25% will be paid.
Corporation Tax – a reminder that between 1 April 2021 and 31 March 2023 companies investing in qualifying new plant and machinery can claim a “super-deduction” providing an allowance of 130% on the cost of the machinery. Unfortunately, this allowance does not apply to unincorporated businesses.
Looking slightly further ahead, the Government did announce in the 2022 Spring Statement that the basic rate of income tax will reduce from 20% to 19% from April 2024. However, they also announced the freezing of the income tax personal allowance and higher rate threshold thus further increasing the fiscal drag by bringing more taxpayers into the basic and higher rates of tax.
At the time of writing the Government announced a £15 billion package of targeted support measures to assist with the rise in the cost of living, which includes all households receiving a £400 discount on energy bills, together with other measures to support the most vulnerable. This is to be partially funded by a windfall tax levy on energy companies, who have made unexpected profits in this period.
It remains to be seen how effective these measures are, and whether inflation can be brought under control without a significant raise in interest rates, but it does seem clear that we are in for a bumpy ride for the foreseeable future.