There are a number of changes happening next month that you need to be aware of and plan for:
1. All VAT registered businesses need to be Making Tax Digital (MTD) compliant.
Currently only VAT registered businesses with turnover over £85K need to follow the MTD rules (ie keep digital records rather than paper and use MTD compliant software to submit VAT returns) but this is about to change to ALL VAT registered businesses. The first return starting on or after 1 April 2022 will need to follow the MTD protocol.
NB MTD for Income Tax has been delayed until 6 April 2024 with Corporation Tax likely to follow soon afterwards.
If your VAT registered business is not yet MTD compliant please contact us to discuss the options.
2. Increases to National Minimum / Living Wages
The following rates will apply from 1 April 2022:
National Living Wage £9.50 (6.6% increase from £8.91)
21-22 year olds £9.18 (9.8% increase from £8.36)
18 – 20 year olds £6.83 (4.1% increase from £6.56)
16 – 17 year olds £4.81 (4.1% increase from £4.62)
Apprentice rate £4.81 (11.9% increase from £4.30)
With many businesses struggling with rising input costs (especially energy bills) and supply chain issues these increases may be a challenge for some. It is vital you calculate the extra cost your business will be incurring from next month as a matter of urgency and consider the impact on your profitability and cash flows. Please contact us if you need help with this.
3. National Insurance Increases
The amount of National Insurance you pay depends on your employment status and how much you earn. From 6 April 2022 to 5 April 2023 the rates across the board have been increased and will (supposedly) be spent on the NHS, health and social care in the UK. The new rates are:
Self employed 10.25% (increase of 13.9% from 9.0%) and 3.25% (increase of 62.5% from 2.0% !)
Employees 13.25% (increase of 10.4% from 12.0%) and 3.25% (increase of 62.5% from 2.0% !)
Employers 15.05% (increase of 9.1% from 13.8%)
The reward to entrepreneurs for surviving Covid and Brexit and creating employment is a hike in employment taxes, a real kick in the teeth some may feel.
Again, employers ought to be calculating the extra cost of their payroll following the Employers’ NI rate increases and considering the impact on profits and cash flow.
4. Dividend Tax Increases
Shareholders don’t escape the increases either as is shown below:
Basic rate 8.75% (increase of 16.7% from 7.5%)
Higher rate 33.75% (increase of 3.8% from 32.5%)
Additional rate 39.35% (increase of 3.3% from 38.1%)
It is likely that given NI and dividend taxes are increasing by similar amounts, tax efficient profit extraction advice will remain unchanged but it is always worth checking with us at your monthly / quarterly review.
