Tax update 2022/23

From 6 April there will be changes to tax legislation which may affect you and your business.  Below we outline the facts and figures which will form the basis of the changes:

 

Making Tax Digital

Making Tax Digital (MTD) is aimed at helping businesses reduce errors and save time managing their tax compliance obligations.  MTD requires businesses to keep digital records and submit information using compatible software.  At the moment VAT is the only tax that has been moved to MTD and businesses with a taxable turnover above £85,000 have been required to follow MTD since 2019.  From 1 April 2022, MTD becomes mandatory for all VAT registered businesses regardless of their turnover. 

If we submit VAT Returns on your behalf, we will ensure you are compliant with MTD for VAT. 

If you complete your own VAT Returns and have yet to sign up to MTD, you need to:

  • choose Making Tax Digital-compatible software

  • keep digital records starting from 1 April 2022 or the beginning of their VAT period

  • sign up and submit their VAT Return through Making Tax Digital

Please get in touch if you need assistance in choosing a software, setting up your MTD software or require any training.

The MTD programme is set to expand from April 2024, with self-employed individuals and landlords earning over £10,000 being required to register and submit quarterly returns to HMRC via software. 

 

Dividend Tax

 

From 6th April 2022, dividend tax rates are increasing by 1.25%.  The new dividend rates will be as follows:

Basic rate tax payer - 8.75%

Higher rate tax payer - 33.75%

Additional rate tax payer - 39.35%

 The tax-free dividend allowance is remaining at £2,000.

 

Capital Allowances – Super Deduction

For expenditure incurred to 31 March 2023 on new qualifying plant and machinery, a super deduction of 130% can be claimed.  This replaces expenditure that would ordinarily have qualified for an 18% main rate, albeit potentially eligible for a claim for annual investment allowance of 100%.  Second-hand plant and machinery would not qualify for this super deduction but will still qualify for writing down allowance or annual investment allowance.

Additionally, a first year allowance of 50% on most new plant and machinery expenditure that would normally qualify for the special allowance on fixtures and fittings which are an integral part of a building (for example electrical systems, air conditioning, lighting) is also available.

 

Disposal of Property – Capital Gains Tax

As a reminder, if you sell a buy-to-let property you are required to report any Capital Gains Tax liability and pay any Capital Gains Tax due within 60 days of the completion of the sale.  This applies to both UK and non-UK residents.

The report and payment must be made using HMRC’s digital UK Property Service.

There are penalties for late submission of reports and payments and these are applied in a similar way to that of self-assessment tax returns. 

If you have disposed of a property since 6 April 2021 and have not yet reported it to HMRC, please get in touch for assistance.

Capital Gains Tax (CGT) annual exempt amount

You won’t pay Capital Gains Tax (CGT) on gains that you make under the annual exemption threshold (and after the personal allowance). The threshold is different for individuals and trusts.

The annual exempt amount for Capital Gains Tax for 2022/23 is :

  • £12,300 for individuals

  • £6,150 for trusts

You start paying CGT on gains that you make above those thresholds. The rate of Capital Gains Tax payable depends on what the gain results from (in other words, what you disposed of, and what rate of income tax you pay.

 

Corporation Tax

 In 2021 the government announced their plan to increase the rate of Corporation Tax, though the changes won’t take effect until 2023. The changes also won’t apply to everyone, and instead depend on how much profit the company makes.

  • Companies with profits of £50,000 or less will continue to pay Corporation Tax at 19%

  • The rate will increase in bands, with businesses whose profits are greater than £250,000 paying a maximum of 25% Corporation Tax. More information about the profit bands and which rate of tax is payable should be available soon.

 

Pensions

 The Lifetime Allowance remains at £1,073,100 and the Annual Allowance remains at £40,000. As these allowances haven’t increased with inflation, it effectively means those saving to the maximum extent possible with tax concessions can save less in real terms each year.

Should you have any questions regarding anything above, please don’t hesitate to contact us.

Jamie Brown