January 07, 2022

Article

After the unprecedented business and employment support, 2022 is the year in which the Chancellor begins to demand payment for the bill. One way in which this will take effect is the freezing of a myriad of thresholds, allowances and reliefs from 6th April 2022. Some key ones include:

  • The personal tax allowance and Income Tax thresholds will remain at their 2021/22 levels until 5th April 2026.
  • The pension lifetime allowance is frozen at £1,073,100 until 5th April 2026.
  • The Capital Gains Tax annual exemption of £12,300 (£6,150 for trustees) is frozen until 5th April 2026.
  • Both the Inheritance Tax nil-rate band of £325,000 and residence nil-rate band £175,000 are frozen until 5th April 2026.
  • ISA thresholds will remain at their 2021/22 level.

Later changes include:

  • The Super Deduction is set to end 31st March 2023 coinciding with the Corporation Tax rate increase.
  • The Annual Investment Allowance of £1m is set to reduce to £200,000 from 1st April 2023.
  • The EIS sunset clause remains intact ending this relief on 6th April 2025.

Then comes the tax rises:

  • Employees, the self-employed and employers will see national insurance rates rise by 1.25 percentage points from 6th April 2022.
  • Dividend tax rates will increase by 1.25 percentage points from 6th April 2022.
  • Companies will see the Corporation Tax rate increase by 6 percentage points to 25% for profits over £250,000 from April 2023 (profits over £50,000 impacted also). Companies with 12-month accounting periods commencing after 1st April 2022 will therefore be impacted.

Whilst political shenanigans and the next general election will no doubt alter the above position, there is a very real debt to be paid. Without a doubt we will all feel the tax pinch for the foreseeable future, therefore getting the basics right will prove even more crucial.

A few to consider:

  1. Implementing salary sacrifice arrangements for auto enrolment.
  2. Providing tax efficient benefits.
  3. Bringing forward bonuses/dividends.
  4. Reviewing capital allowance claims carefully.
  5. Utilising available tax allowances and reliefs.
  6. Consider tax deferral claims carefully.

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