Everything You Need to Know About the Upcoming Tax Year
There are a number of changes coming into effect from April 2022 that are designed to ease the cost of living. These include increases in national insurance contributions, dividend tax rates and VAT levels in the hospitality sector.
In this article, we explain the new changes and how they are likely to affect you in the new tax year.
1) Tax Return Deadlines
Your company tax returns are due within 12 months of your accounting period ending.
If you need to file a self-assessment tax return, the deadline is 31 January 2023 (or 31 October 2022 if you're filing a paper return). If you don't file or pay on time, you'll get a £100 late filing penalty. The longer you leave it, the worse the consequences will be.
2) Corporation Tax Relief
In the incoming tax year, you'll be able to carry forward any unused corporation tax reliefs. This allows you to carry back unused reliefs from the past two years if you haven't already done so. You can then apply the reliefs against your annual tax liability.
The 'super deduction' corporation tax relief introduced on 1 April 2021 will end on 31 March 2023. This means that if you want to save on your company tax bill, you should buy any assets in the next year.
3) Income Tax Bands
Income tax thresholds will increase. The basic rate will come up to £12,571 to £50,270.
The personal allowance will rise to £12,570. The higher rate tax threshold will also rise at £50,271 TO £150,000. This means that people earning less than £12,500 will no longer have to pay any income tax and those earning less than £48,000 will have a reduced income tax liability.
The basic rate will be 20 percent, the higher rate 40 percent and the additional rate 45 percent.
4) National Insurance Contributions
The UK government has announced a new tax increase of 1.25 percent for the upcoming tax year. This is in addition to the 12 percent and 2 percent rates that were in place for the previous tax year. The new rates will be 13.25 percent and 3.25 percent for employees and 10.25 percent and 3.25 percent for business owners.
The tax increase will be effective starting next month, and will apply to all income earned in the UK. This includes income from employment, self-employment, investments and pensions. The government says that the new tax rates will help to raise additional revenue to fund public services and reduce the deficit.
5) Dividend Tax Rates
The tax rates on dividend income have gone up by 1.25 percent as of April 6th, so this will likely have a significant effect on your dividend income. The new ordinary tax rate is 8.75 percent, the upper rate is 33.75 percent, and the additional rate is 39.35 percent.
This change has been made in an attempt to reduce the amount of tax avoidance by people who pay themselves through dividends instead of wages.
In conclusion, the new UK income tax and corporation tax rates, thresholds and reliefs announced in this year's budget will come into effect this coming tax year. If you earn any kind of income in the UK, you should be aware of these changes and how they will affect you.
Make sure you are working with an accountant to stay on top of any changes. 1 to 1 Accountants provides accountancy services for a business so that they don't fall back on taxes and other financial issues. Get in touch with us today to get started.