We're at the turn of the tax year once again and with the end of the Coronavirus Act, a cost of living crisis and rampant inflation, it's an important one for businesses and individuals alike.
There had been a number of changes planned for a time now, including the 1.25% uplift to National Insurance (NI) and dividend tax.
But Chancellor Rishi Sunak's Spring Statement, delivered in March, threw a number of surprise tax changes into the mix, too.
National Insurance
The changes to NI have been well reported since the Government first announced they would be charged at an extra 1.25% in September 2021 for the 2022/23 tax year. Dividend tax will also increase by that amount.
After 2022/23, rates will return to their previous levels but a 1.25% new health and social care levy will be applied to people's income to provide extra NHS and social care funding.
Amid criticism to scrap the plan to help people cope with the current cost of living crisis, the Government has gone ahead with the plan.
Therefore, employees will be taxed at 13.25% on earnings up to the upper earnings threshold of £50,270.
Employers will pay Class 1 secondary contributions to HMRC as part of their PAYE bill of 15.05%, up from 13.8%.
However, to mitigate the impact, the point at which people pay NI will increase by £3,000 to £12,570 in July 2022 - £2,700 more than originally planned and equal to the income tax allowance.
According to the Government, 70% of NI contributors will pay less because of the move.
VAT
The temporary 12.5% VAT rate for hospitality ended on 1 April 2022, bringing an end to the support eligible businesses saw through relaxed VAT rates during the pandemic.
In July 2020, the Government introduced a reduced VAT rate for hospitality, hotel and holiday accommodation from 20% to 5%.
It was extended and then increased to 12.5% for a transition period to officially end on 31 March 2022.
However, VAT on energy-saving materials, such as solar panels and heat pumps, will be decreased to 5% to 0% from April 2022 to 31 March 2027.
Green relief for business rates
At Autumn Budget 2021, the Government announced the introduction of targeted business rate exemptions from April 2023 to March 2035 for eligible plant and machinery used in onsite renewable energy generation and storage.
It also announced a 100% relief for eligible low-carbon heat networks with their own rates bill to support the decarbonisation of non-domestic buildings.
The Government is now bringing these measures forward by a year and they will take effect in the 2022/23 tax year.
Tax thresholds remain frozen
The Government seems keen to reduce the public deficit while avoiding direct tax changes, so one major tool they have is tax threshold freezes. As such, many tax thresholds remain frozen for the 2022/23 tax year and beyond.
For instance, the capital gains tax allowance remains frozen at £12,300 for individuals until 2026. As it will not rise with inflation, gains on the sale of a second home and shares that are not in an ISA are more likely to face a tax charge in the future.
The personal allowance for income tax (£12,570) also remains frozen, although a tax cut of the basic rate of income will be cut from 20% to 19% from 2024.
Both the inheritance tax nil rate (£325,000) and residential nil rate band (£175,000) are also frozen for the next four years, as is the pensions lifetime allowance of £1,073,100.
With rising house prices, it's therefore likely a lot more estates will be caught in the inheritance tax net.
Talk to us about the tax implications for you and your business in 2022/23.