The costs of running the country during Covid have been huge and inflation is expected to increase the country's debt. The Office for Budget Responsibility has said the Treasury will need to come up with £45billion in interest, before it even thinks about paying the debt itself. As taxpayers, we will provide the extra money!
Since April the Chancellor has not directly increased the income tax rates we pay, she has frozen the thresholds at which base and top income tax rates are paid from April 2022 to April 2026, thus increasing the amount we actually pay for inflation drives up income
There will also be an additional 1.25% contribution added to Employees' and Employers' National Insurance from April and a similar additional cost on dividends. a as a Health and Social Contribution. From April 2023, it will be extended to employees who have passed the legal retirement age.
The changes won't stop there. The Treasury has published a series of consultations that could lead to additional costs.
There will be greater scrutiny if you are self-employed or becoming a new landowner, with the responsibility to report your new business even before it becomes a taxable profit. , to collect taxes earlier. It is still only a consultation at this stage, but the government naturally wants to raise funds quickly.
These changes mean it will be more important than ever to make sure you don't pay too much tax - and there are two key areas to consider:
Are you claiming all your benefits?
Taxes are complicated and we may tend to simply rely on HMRC to tell us what we owe them. Fact is they are only human and HMRC makes mistakes. In particular, they may have overlooked a benefit or two, especially if your income has fluctuated over the past few months.
It may be helpful to take a look at your tax return. If you find errors, there is a relatively simple way to interrogate. HMRC has a well-developed and surprisingly effective resort system that you can find here: https://www.gov.uk/taxap/decision
Can reduce your tax liabilities?
look at your investment portfolio and (if practicable) ensure you take advantage of the full £12,300 CGT allowance before 5 April 2022For Shareholders/directors, consider the timing of bonuses and dividends to mitigate the planned 1.25% rate increase
look at Salary sacrifice arrangements which can be particularly effective in mitigating income tax and national insurance contributions.
These steps are all entirely legitimate, but the rules and regulations are complicated. Getting expert help may be vital. Please contact us about planning for the April tax changes. We can provide a full tax review which will help identify the marginal tax traps waiting for you – and help you to avoid them. For further information on personal tax planning, please contact Motif Accounting on 116 262 3450