2022 Tax Calendar - Important Dates To Note
If the past two years have taught us anything, it is that the future is impossible to predict. Even established traditions that were ingrained into the business cycle, are no longer taken for granted. Historically the Chancellor would present an annual budget to Parliament in which he would set out his vision for the financial well-being of the country, the fiscal rules which would guide his vision, and the rates of tax and new legislation which would be brought into achieving his goals. The 2020 budget was canceled and so 2021 gave us two budget speeches - one in March and the second in October. And even the announcements made in those speeches, were in many cases, reversed by the now (almost expected) U-turns. So, what do we know that 2022 will bring, and what planning can business owners make to give them the most efficient tax results?
CGT on disposals of residential property
Let us begin with a change that comes into force just a few days before 2021 makes way for 2022. From the 26th of December 2021, UK residents disposing of UK residential property will have 60 days during which to report and pay any capital gain arising on the disposal. Since the 6th of April 2020, these transactions have had to be reported and paid within 30 days of completion which was often a struggle for taxpayers facing administrative hurdles, and the additional time has been welcomed as a sensible step. (Non-UK tax residents have been obliged to report disposals of any UK property or land, both residential or commercial, and pay any CGT within the same time limits).
In the UK the tax year runs from the 6th of April to the 5th of April (consultations are ongoing regarding the possibility of changing this to the 31st of March) and therefore most of the changes in legislation are brought into force from the start of the new year on 6th April 2022. As such, the first quarter of 2022 is an opportunity to undertake any transactions where the existing rates are more advantageous.
The thresholds at which income tax is charged are remaining the same. Income between £12,571 and £52,700 is taxed at 20%. Income between £52,701 and £150,000 is taxed at 40% and income above that threshold is taxed at 45%. Many have noted that not raising the thresholds in line with inflation is essentially a stealth tax and means that taxpayers will have less take home pay as a result.
Health and Social Care Levy
The most significant tax rise in the 2022/23 tax year is the Health and Social Care Levy which will temporarily increase National Insurance rates by 1.25% as set out in the table below.
Employee’s primary class 1 rate between primary threshold and upper earnings limit
Employee’s primary class 1 rate above upper earnings limit
Employer's secondary class 1 rate above secondary threshold
Class 4 rate between lower profits limit and upper profits limit
Class 4 rate above upper profits limit
Class 1A / 1B NIC
Revenue raised from the levy will go directly to support the NHS and equivalent bodies across the UK. From April 2023 National Insurance Contributions rates will decrease but a Health and Social Care Levy of 1.25% ringfenced to support UK health and social care bodies will be introduced.
In line with the increases to National Insurance rates, the rates at which dividends are taxed are also increasing from 6 April 2022.
Basic rate band
Higher rate band
Additional rate band
Corporation Tax on profits realised by companies remains unchanged at 19%, however, these are set to rise from April 2023 with profits within the higher band suffering a rate of 25%. Directors should consider the timing of transactions so that they benefit from the relevant rates.
Don’t forget to take advantage of the Super Deduction which allows companies to claim a 130% tax reduction on qualifying expenditure incurred prior to 31 March 2023. Check out my Top Tax Tips episode for more information...
Residential Property Developer Tax
The Residential Property Developer Tax will only affect large property companies and groups who make profits from UK residential property developments. This new tax will apply from 1 April 2022 at 4% of profits over a threshold of £25m per year. The money raised is intended to fund measures to address unsafe cladding on high-rise residential buildings.
Making Tax Digital (MTD)
From April 2022, the requirements to keep digital VAT records and send returns using MTD-compatible software will apply to all VAT-registered businesses. HMRC introduced MTD reporting requirements in April 2019 and after some delays will be extending it to all VAT registered businesses. The extension means that even voluntarily VAT-registered businesses below the VAT threshold must meet MTD rules. This is the next stage in the HMRC 10-year strategy for the tax system “to improve its resilience, effectiveness, and support for taxpayers” which will eventually encompass all aspects of taxpayers’ interaction with HMRC, and aims to have one account via which all taxes are reported digitally and more frequently to HMRC.
According to a report by HMRC in September 2021, only a third of those VAT registered businesses with a turnover below the registration threshold had chosen to join MTD, so now is the time to ensure that your records are compatible with HMRC's systems, that they are able to digitally record and preserve business transactions, send HMRC the returns in the correct format, and receive digital information from HMRC.
Governments have struggled to curtail the rapid expansion of transactions in Bitcoin and other cryptocurrencies and are keen to ensure that income and gains realised from trading with digital currencies are taxed efficiently. This is an area where I expect legislation to be brought in and I would recommend that those dealing in these currencies retain records so that these are in hand should they be required to produce them.
The constantly changing tax landscape can result in business owners inadvertently making tax-inefficient decisions or even falling foul of the law. I would suggest that you review your portfolios and goals with your accountant and tax advisor early in the new year so that you can plan for success.