Taxes and wages are rising
Last autumn, the Chancellor announced that the rates of most classes of National Insurance Contributions (NIC) would temporarily increase by 1.25 percentage points for the year starting 6 April 2022, in order to raise funds for the NHS and social care.
These NIC rate increases will be replaced by the Health and Social Care Levy (HSCL) from 6 April 2023, which will also be set at 1.25% of income. The HSCL will apply to the earned income or trading profits of people who are working beyond state retirement age, unlike Class 1 employees’ NIC and Class 4 that is payable by the self-employed.
To ensure that taxpayers who take their income in the form of dividends also pay their fair share of tax, all the tax rates applicable to dividends will also rise by 1.25 percentage points from 6 April 2022. The combination of these two rate rises will have a significant effect on the tax and NIC payable by shareholders of family companies.
All employers need to budget for increases in the rates of National Living Wage and National Minimum Wage from 1 April 2022.
Also from 1 April 2022, all VAT-registered businesses will be required to submit their VAT returns using MTD-compatible software and to keep their VAT records in a digital format. HMRC is introducing a new system of penalties to encourage taxpayers to comply with MTD and to pay their VAT on time.
We recommend you undertake an annual review of your financial affairs, in order to check that you are not paying more tax than you need to and whether the structures you set up in the past are still appropriate. Between now and the end of the tax year (5 April 2022) is a good time to assess whether you have claimed all the relevant allowances and are as well defended against high tax charges as you can be.
Of course, the personal circumstances of each individual must be taken into account in deciding whether any particular plan is suitable or advantageous, but these suggestions may give you some ideas. We are happy to discuss them with you in more detail.
