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Tax planning ahead of April 2022
The cost of keeping the country running through covid has been huge and inflation is expected to add to the country’s debt. The Office for Budget Responsibility has indicated that the treasury will need to find £45bn in interest, before even thinking about paying off the debt itself. As taxpayers we will be providing the extra cash!
From April, the Chancellor is not directly increasing the rates of income tax we pay, he is freezing the thresholds at which basic and higher rates of income tax are paid from April 2022 to April 2026, effectively increasing the amount we actually pay as inflation pushes up earnings.
There will also be an additional 1.25% contribution added to both employee and employer National Insurance from April and a similar additional charge on dividends. This is referred to as the Health and Social Care Levy. From April 2023 it will be extended to employees above the state pension age.
The changes will not end there. The Treasury has issued a raft of consultations which could all mean extra costs.
There will be greater scrutiny if you are self-employed, or if you become a new landlord, with the onus on you to report your new venture even before it turns a taxable profit.
There could also be increasing pressure for ‘timely payment’ or in other words, collecting tax sooner. This is still just a consultation at this stage, but the government is keen to raise funds quickly.
These changes mean that it will be more important than ever to ensure that you are not paying too much tax.
Our Year End Tax Planning Guide provided on the link below will help you to consider legitimate ways to achieve this including:
- Maximising your pension contributions to make full use of tax relief
- Looking at your investment portfolio and (if practicable) ensuring you take advantage of the full £12,300 CGT allowance before 5 April 2022
- For Shareholder/directors, consider the timing of bonuses and dividends to mitigate the planned 1.25% rate increase
These steps are all entirely legitimate, but the rules and regulations are complicated.
Please contact us about planning for April or regarding any of the issues below, we are here to help.
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