With the new tax year having begun on 6 April 2022 and lasting 12 months until 5 April 2023, the government have introduced numerous changes in an attempt to ease the cost of living. Whether you are a business owner or an employee, you are likely to notice this having an impact. New legislation such as an increase in national insurance contributions, dividend tax rates, and VAT levels in the hospitality sector will come into effect from April 2022. In this article, we explain the new changes that have been introduced and how you are likely to notice this in the new tax year.
Income tax bands
The income tax bands for the 2022/23 tax year are:
- Personal allowance: Up to £12,570 (0% tax rate).
- Basic rate: £12,571 to £50,270 (20% tax rate).
- Higher rate: £50,271 TO £150,000 (40% tax rate).
National Insurance contributions
The chancellor announced that a new UK-wise increase of 1.25% will be introduced from the beginning of this new tax year, in an attempt to raise funds for the health and social care sectors. In the previous tax year beginning in April 2021, employees had to pay 12% on earnings up to £50,270, then 2% on anything above this threshold. This has now been increased to 13.25% and 3.25% respectively. As a business owner, these rates have changed from 9% and 2% to 10.25% and 3.25%, so you will need to plan accordingly for this change.
Dividend tax rates
If you earn money through dividends, the income tax rates were increased by 1.25% from 6 April, so this will likely have a noticeable impact on your dividend income. The new ordinary rate is now 8.75%, the upper rate is 33.75% and the additional rate is 39.35%, and has been introduced to limit individuals paying themselves via dividends as opposed to wages in an attempt to reduce their tax bill.
Tax return deadlines
Now that the new tax and financial year has begun, if you are self-employed or a sole trader, you should have been contacted by HMRC to fill out a tax return. You will need to file your company tax returns within 12 months of the end of your accounting periods. If you are required to submit a self-assessment tax return, you must file this by 31 January 2023, or 31 October 2022 if you are submitting a paper return. Failure to file or pay tax bills can result in a £100 late filing charge, or more serious consequences the longer you leave it.
Corporation tax relief
The ‘super deduction’ corporation tax relief which was introduced on 1 April 2021 is in its final year and runs until 31 March 2023. This means if you are an eligible business and are likely to spend money on any qualifying plant and machinery assets, you will want to do so in the next year to make maximum savings on your company tax bill.
These are some key changes and deadlines that you should be aware of now that the new tax year has begun and keeping up to date on the latest updates can help you to plan more effectively for the year ahead. If you require further advice on planning effectively for your business’ accounting year, or you require assistance managing your finances more efficiently, our team at Bells would be happy to help. 020 8468 1087 or .