Budget Comment March 2022
This is part Budget and part reminder of a few other topical areas:
- Budget Comments
- Making Tax Digital
- Government Gateway
- Pensions Again
- Are You Really Self-Employed?
- Reporting UK Property Capital Gains
Budget Comment
- The big one: Corporation Tax rises to 25% from 1 April 2023 for profits greater than £250,000; small businesses with profit of £50,000 or less continue to pay the current 19% with a sliding scale in between. But, you guessed it, this was announced in last year’s Budget!
- CGT & IHT thresholds, Pensions, Lifetime Allowance, Income Tax Personal Allowance and Basic rate thresholds continue to be frozen at 2020-21 levels until 2025-26 as previously announced!
- The Basic Rate of Income Tax (unchanged for many years) remains unchanged until 6 April 2024 when (just before the General Election (May 2024?)) the rate falls from 20% to 19%.
- National Insurance is increased by 1.25% from April 2022 (to fund the Health and Social Care Levy). In a move to capture a similar increase from those paying themselves with dividends, the Dividend Tax rates (7.5%, 32.5% and 38.1%) all increase by 1.25% at the same time – as previously announced.
- National Insurance – significant increase to the Primary Threshold from £9,880 to £12,570 from July 2022.
- National Insurance Employment Allowance increases from £4,000 to £5,000 with effect from April 2022!
- Green Savings Bonds from NS&I are now available. Lock away up to £100,000 for three years and earn interest at the current fixed rate of 1.30% per annum.
- From 1 April 2022 significant changes to late payment and late submission penalties (these won’t affect you if you do everything on time!)
Making Tax Digital ‘MTD’
Check our Digital Tax page! As previously noted there’s a revolution on its way (slowly!). First announced in the April 2015 Budget, ‘MTD’ will really hit home from April 2024. Up to now the MTD impact has only been felt by VAT registered businesses and it hasn’t been that big an impact. All of these businesses were reporting quarterly already – so not a big deal to report it in a slightly different way! From April 2024, roughly all Self Employed and property landlords will have to transition from doing one Tax Return a year to 5 (five!). I’ve said before that there is a revolution on the way and this is what I mean. The timing has been significantly delayed. So far it has happened for VAT registered businesses above the VAT threshold (£85,000) and we expect the next wave of MTD to affect VAT registered businesses with a turnover below £85,000 for the first returns starting on or after April 2022. At present, Self Employed and Landlords with income above £10,000 will be required to follow MTD rules from the accounting period starting on or after 6 April 2023. You can see in our information request that we won’t be able to cope without you taking the transition seriously! Further details to follow…Government Gateway
You may have heard the expression ‘Government Gateway’. It is becoming more and more a feature of everyday life and essential for Making Tax Digital! If you haven’t registered then we recommend that you do so – it’s good to be prepared! Follow the link here: www.gov.uk/personal-tax-account/sign-in/prove-identity Just to be clear, we deal with your Self Assessment (and where applicable) Company Corporation Tax through our own Agent Government Gateway but we cannot set up your individual Gateway. There are a number of areas for which it is required. For example:- Reporting UK residential property sales (see above!)
- Applying for time to pay your tax liability
- Accessing your Personal Tax Account
- Submitting Making Tax Digital VAT Returns
- Submitting Making Tax Digital Rental Income Returns (to follow)
- Applying for your State Pension forecast
Pensions
Recapping, this is an increasingly complex area for which we recommend specialist advice but here are a few things to look out for:- Personal Pension Annual Allowance continues to be £40,000 (with potential to bring forward unused allowance from the previous three years) providing you have earned income of at least this level
- Once your adjusted income is over £240,000 your Personal Pension Annual Allowance will be lost at the rate of £1 for every £2 that your total income exceeds £240,000. It carries on tapering until your total income exceeds £312,000 at which point you are fully tapered down to £4,000 (previously the full taper only took you down to £10,000)
- The Lifetime Allowance remains at £1,073,100
Are you really Self Employed?
The rules are tightening! If you (or the person/business engaging you) want your status to be ‘self-employed’ (either on your own account or through your own limited company), it is important for you to be seen to be running a business rather acting as an employee. Otherwise you and (more particularly) your engager could have an issue with the UK tax authorities (they may insist that you are paid through an official payroll). There are no hard and fast rules here but having a ‘self-employed’ status generally means for example, seeking additional customers, not directly supervising client staff, working with your own equipment, having a Website describing your business and of course you should be the one advising people what to do rather than being told what to do!Reporting UK Property Capital Gains
For all UK residential property sales since 5 April 2020, where tax is due, you must submit a Capital Gains Tax Return within 60 days (this was 30 days until extended recently) of the completion – the estimated Capital Gains Tax (CGT) is due at the same time. Penalties and interest will be charged on late submissions. We say ‘estimated’ because CGT rates depend on your level of income and you may subsequently realise a loss that can be offset. It is clear that many Solicitors don’t consider it to be their responsibility to point out this obligation so please inform us immediately on sale if you are unsure whether your Solicitor is dealing with the Return… The sale will also still form part of your Self Assessment Tax Return for the year in question. The comments above are brief highlights and each item is subject to change, please note the full chart of Rates and Allowances below and remember – there is always more to it than meets the eye so please contact us before taking or refraining from action.Rates and Allowances for 2022 and 2023
Rates and allowances for Income Tax, Corporation Tax, Capital Gains Tax, and Inheritance Tax are set out below.
| 2021-22 (£) | 2022-23 (£) | Increase (£) | |
| Income Tax allowances | |||
| Personal allowance Personal allowance (age 65-74) Personal allowance (age 75 and over) |
12,570 N/A N/A |
12,570 N/A N/A |
0 0 0 |
| Income limit for under 65 personal allowance Income limit for age-related allowances |
100,000 N/A |
100,000 N/A |
0 0 |
| Married couple’s allowance for people born before 6 April 1935 Minimum amount of married couple’s allowance Blind person’s allowance |
9,125 3,530 2,520 |
9,415 3,640 2,600 |
290 110 80 |
| Capital Gains Tax annual exempt amount: Individuals etc. Trustees Main Rate Lower Rate Main Rate (for gains on residential property) Lower Rate (for gains on residential property) |
12,300 6,150 20% 10% 28% 18% |
12,300 6,150 20% 10% 28% 18% |
|
| Inheritance Tax Nil rate band limit Residence nil rate band limit Main Rate |
325,000 100,000 40% |
325,000 100,000 40% |
|
| Taxable bands 2021-22 (£) | Taxable bands 2022-23 (£) | ||
| Starting rate 10% | – | Starting rate 10% | – |
| Basic rate 20% | 0 – 37,700 | Basic rate 20% | 0 – 37,700 |
| Higher rate 40% | 37,701 – 150,000 | Higher rate 40% | 37,701 – 150,000 |
| Additional rate 45% | Over 150,000 | Additional rate 45% | Over 150,000 |
| Income tax rates | ||
| Tax year 2021-22 | Tax year 2022-23 | |
| Basic rate | 20% | 20% |
| Higher rate | 40% | 40% |
| Additional rate | 45% | 45% |
| Dividend ordinary rate – for dividends otherwise taxable at the basic rate (effective rate with tax credit) |
7.5% | 8.5% |
| Dividend upper rate – for dividends otherwise taxable at the higher rate (effective rate with tax credit) |
32.5% | 33.75% |
| Dividend additional rate – for dividends otherwise taxable at the additional rate (effective rate with tax credit) |
38.1% | 39.35% |
| Dividend allowance From April 2016, the new Dividend Allowance means that individuals will not have to pay tax on the first £5,000 of dividend income they receive. |
£2,000 | £2,000 |
|
Personal savings allowance Higher rate taxpayers will not have tax to pay on their first £500 of savings income. |
£1,000
£500 |
£1,000
£500 |
| Starting rate for savings | ||
| Tax year 2021-22 | Tax year 2022-23 | |
| Starting rate for savings | 0% | 0% |
| Starting rate limit for savings | £5,000 | £5,000 |
| Corporation Tax profits 2022-23 (£) | |
| All profits – main rate 19% | N/A |
| Marginal relief | N/A |
National Insurance
|
Tax Year 2021/2022 |
Tax Year 2022/2023 |
|||||
| Class 1 Employees (Primary) | ||||||
| On first (pw) | 184 | Nil | 190 pw | Nil | ||
| Between (pw) | 184-967 | 12% | 190-967 | 13.25% | ||
| Over (pw) | 967 | 2% | 967 | 3.25% | ||
| Class 1 Employers (Secondary) | ||||||
| On first (pw) | 170 | Nil | 175 | Nil | ||
| Over (pw) | 170 | 13.8% | 175 | 15.05% | ||
| Employers’ contracted-out rebate, salary related schemes | N/A | N/A | ||||
| Employers’ contracted-out rebate, money purchase schemes | Abolished | Abolished | ||||
| Class 2 Self employed | ||||||
| Flat rate (pw) | 3.05 | 3.15 | ||||
| Small earnings exception (pa) | 6,515 | 6,725 | ||||
| Special Class 2 rate for share fisherman (pw) | 3.70 | 3.80 | ||||
| Special Class 2 rate for volunteer development workers (pw) | 6.00 | 6.15 | ||||
| Class 3 Voluntary | ||||||
| Flat rate (pw) | 15.40 | 15.85 | ||||
| Class 4 Self employed | ||||||
| On profits between (pa) | 9,568-50,270 | 9% | 9,881-50,270 | 10.25% | ||
| above 50,270 | 2% | above 50,270 | 3.25% | |||
|
Rate |
All land in the UK |
Rate |
All land in the UK |
|
|
Residential |
|
Additional residential property |
|
Zero |
£0-125,000 |
3% |
£0-125,000 |
|
2% |
On next £125,00 |
5% |
On next £125,00 |
|
5% |
On next £675,000 |
8% |
On next £675,000 |
|
10% |
On next £575,000 |
13% |
On next £575,000 |
|
12% |
On the rest (above) £1,500,000 |
15% |
On the rest (above) £1,500,000 |
Previously, SDLT was charged at a single rate for the entire price of a property. From 17 March 2017, SDLT is charged at increasing rates for each portion of the price.
|
Rate |
All land in the UK |
|
|
Non-residential |
|
Zero |
£0-150,000 |
|
2% |
£150,001 – 250,000 |
|
5% |
£250,001 |
The rate of stamp duty / stamp duty reserve tax on the transfer of shares and securities is unchanged at 0.5% for 2022-23.
| Value Added Tax (VAT) – Registration and Deregistration thresholds | ||
| April 2021-22 | April 2022-23 | |
| Standard rate | 20% | 20% |
| Redduced rate | 5% | 5% |
| Zero rate | 0% | 0% |
| Exempt | n/a | n/a |
| Value Added Tax (VAT) – Registration and Deregistration thresholds | ||
| From April 2021 | From April 2022 | |
| VAT – registration threshold | 85,000 | 85,000 |
| VAT – deregistration threshold | 83,000 | 83,000 |