The UK tax year always ends on April 5th and starts on April 6th. As the 2021-22 tax year draws to a close, Stevie Heafford, Tax Partner at accountancy firm HW Fisher outlines the 10 key changes on the horizon:
- State pension increases by 3.1%: The state pension will increase in April, albeit against a backdrop of rising costs – some argue this will cancel out again real gains.
- Minimum wage increase: The National Living Wage (NLW) will rise to £9.50 from 1 April 2022. This represents an increase of 59 pence an hour or 6.6%.
- National Insurance 1.25% rise: In the spring statement, the Chancellor confirmed these rises would go ahead. However, responding to concerns over the cost of living crisis, he announced that the income threshold at which you start to pay national insurance will rise to £12,570 from July 6, 2022.
- Dividend tax increases: Similarly to the National Insurance rate rises, those who earn money from dividends will also see a 1.25 percentage point rise from April.
- Income tax threshold freeze: In the Spring Statement 2021, the Chancellor announced that the personal allowance and the higher rate threshold would be frozen for the four-year period 2022/23 to 2025/26. This measure was forecast to raise £1.56 billion in 2022/23, rising to £8.18 billion in 2025/26
- Pension lifetime allowance continues to be frozen: This means that more people could face a tax charge when they retire.
- A new Plastic Packaging Tax will be introduced from 01 April 2022: aimed at reducing single use plastic and encouraging the use of recycled plastic. In effect, it is an environmental tax that aims to change behaviour and increase recycling. Manufacturers or importers of plastic packaging that have manufactured or imported more than 10 tonnes in any 12 month period or less as at 01 April 2022, or who plan to do so in the next 30 days alone from that date, must register for PPT with effect from 01 April 2022.
- Residential property developer tax: This measure will introduce a new 4% tax which will apply to the largest residential property developers on the profits they make on UK residential property development.
- Inheritance tax reporting change: This is a rule change that has already come into force – but only at the start of this year. For anyone who dies on or after 1 January 2022, there are new rules about whether or not their estate can be classed as an ‘excepted estate’ – this classification may not require heirs to report the estate’s value (as long as there’s no inheritance tax to pay).
- Making Tax Digital for VAT: All VAT-registered businesses must sign up for Making Tax Digital for VAT before 1 April 2022.
Heafford adds: “It may be a few months since we celebrated the new calendar year in January, however thanks to the old Julian calendar – the UK tax year always ends on 5th April which can be traced back to 1752. This means that there are a number of changes on the horizon that could have a big impact on your personal finances. This is particularly important this year given spiralling costs and rising inflation. Our top advice would be to ensure you are up to speed with potential changes and how they will impact you.
In addition to these changes, there are also other potential tax implications you should be aware of. As the tax year ends, you should be notified by HMRC if you need to file a return for the last 12 months. You must submit a tax return if you have self-employed earnings or have received untaxed income over £1,000. You will also have to file if you have generated income from renting out a property, including through Airbnb. You have plenty of time – the deadline for submitting a paper return is 31st October, and you have even longer if you’re filing online (31st January 2023). However, it’s always advised to start early – it can take a while to gather all the necessary paperwork etc.”
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