Posted by Michael Foudy Last updated 24th March 2022 reading time
The New Tax Year
Just in case your head isn't spinning enough from all that's going on in our world we are all obliged to navigate tax rises. We have cut through the detail to provide the key updates as they will affect you from next month with some hints and tips for making your earnings go further amongst a generally gloomy tax landscape.
The Bitesize Detail
Pay Rise – For those who operate a low salary/dividend remuneration model then you’ve got a 2.85% pay rise to look forward to. The Primary Threshold has risen from £737 to £758 per month.
National Insurance Primary Threshold –
In the chancellor’s Spring statement the chancellor announced that the threshold for employees paying national insurance was raised to £12,570, aligned with the personal allowance for income tax.
Employment Allowance – The chancellor also unveiled on 23rd March that the employment allowance would rise to £5,000, and increase of £1,000. This is good news for small businesses with a small number of employees.
Health and Social Care Levy – From 6th April the dividend tax rates will rise by 1.25%. So basic rate dividends will increase from 7.5% to 8.75%. There is still time to declare extra dividends this year to ensure you can extract more cash at this lower rate. The National Insurance rates across the board (for employees, employers and the self-employed) will likewise rise 1.25%. Rental property owners are exempted but pensioners have just twelve month’s grace before they too must pay the levy. Find out more here
Business Rates – Across the board business rates return to normal from April 2022. Retail premises will benefit from a 50% discount. In the current tax year all businesses enjoy a 66% discount on their rates.
VAT – for those in the hospitality industry the reduced VAT rate will no longer apply come 1st April. Food and non-alcoholic drinks revert to the 20% standard rate from the existing 12.5%.
National Living Wage – From April 2022 this will rise from £8.91 to £9.50, a 6.2% increase – find out more here
Super-deduction for Limited Companies – We’re halfway through the lifecycle of this benefit, which in effect provides a 5.7% discount on most tangible purchases. So plenty of time yet to buy that computer, machinery or tool-kit. Note also that the highest rate of corporation tax rate is set to increase from 19% to 25% in April 2023. find out more here
In Conclusion
Regrettably, there is no sugar coating it that April marks an unprecedented month of historic tax hikes and unwinding of Covid relief schemes all set against the considerable headwinds of high inflation due to spiralling energy costs and supply-side constraints. To survive business owners must focus on margin protection through a combination of price management, operational efficiencies and lower acquisition costs. It really is a period of survival of the fittest, or leanest you might say.
