April 6th 2022 marks the beginning of the 2022/2023 tax year and, as always, it comes with financial changes you need to be aware of. As we head into an unprecedented period of economic uncertainty it’s essential to understand how these changes may impact you and your money.
National Insurance increase
As you’ll have no doubt seen in the news, National Insurance is going up by 1.25% for 2022/23, meaning a typical employee can now expect to pay around 13.25% instead of 12% in the new tax year. The Government has stated that this increase is to help pay for the NHS and social care.
Dividend Tax Rate increase
As we talked about in another recent blog, dividend tax is set to rise in 2022/23, to ensure that people who receive income in dividends are paying an amount inline with the National Insurance rise. Take a look at the blog for more information.
State Pension increase
If you receive a State Pension, the amount you receive will increase by 3.1%. For people on the full new single-tier State Pension, this means an extra £5.55 per week (£185.15 up from £179.60). The basic State Pension will go up to £141.85 from £137.60 a week.
Capital Gains tax reporting extension
This was announced in the Autumn 2021 Budget as a change for 2022/23 but came into affect immediately after the budget (on 27 October 2021). The window for reporting capital gains has been extended to from 30 to 60 days, meaning anyone selling a property on or after 27 October 2021 now has 60 days to submit a residential property return to HMRC and pay any monies owed.
Inheritance tax changes
This rule change came into force at the beginning of the year but it’s one you should be aware of: there are new rules about whether estates belonging to someone who died on or after 1st January 2022 can be classed as an ‘excepted estate’, that is, an estate where a full inheritance tax account is not required. The new requirements to count as an excepted estate are:
- – The estate must have a value below the inheritance tax threshold
- – Be worth no more than £650,000 where any unused threshold is being transferred from a spouse/civil partner who died first
- – Be worth no more than £3million, where the deceased left everything to a spouse or civil partner (based in the UK), or to a registered UK charity (that qualifies)
- – Where the deceased was living outside the UK when they died, UK assets must be less than £150,000
Other things to think about
Everyone is going to be feeling a financial pinch this year, so think about what tax relief you can make use of to help you:
Pension contributions
The Government want to encourage people to save for their retirement, and so pay tax relief on pension contributions, which means your pension provider can claim tax back from HMRC to add to your contributions. Tax relief is received at the highest rate of income tax you pay, so for a basic rate taxpayer, the tax relief is 20%, meaning that every pound you pay in becomes £1.25. In more basic terms, receiving a 20% tax relief is the same as getting a 25% bonus to every contribution you make: hard to beat in terms of investing!
Donations
As an individual, donations to charity are tax free, meaning that if you donate through Gift Aid or through Payroll Giving, you can get tax relief. If you’re a UK tax-payer and make a donation, Gift Aid is a repayment of the basic rate Income Tax that you pay on that donation – which is 20%. However, rather than the tax being paid back to you, the money goes to the charity.
If you need advice on how these changes may affect you, get in touch today. We’re here to make your accounting and tax matters simple!