Tax changes SMEs need to be aware of in 2022

During 2022, there are several tax changes you need to be aware of so you can manage your cash flow and comply with tax reporting obligations.

In this article, using useful information from which.co.uk we explain the tax changes SMEs need to factor into their planning for the 2022/23 tax year.

Changes in National Insurance threshold and rates

National Insurance (NI) rates are set to increase by 1.25% from 6 April 2022. This is primarily driven by increasing expenditure on social care and the health service as a whole.

For the 2022/23 tax year the increase will be paid as part of employees’ existing NI payments, however, from 6 April 2023, the plan is to make the health and social care levy separate.

The NI lower earnings threshold is set to increase by 3.1%. Upper earnings thresholds are being frozen at £50,270.

The below table sets out the differences in NI rates and thresholds between the 2021/22 tax year and the 2022/23 tax year.

Employees paying Class 1 National Insurance

Self-employed paying Class 2 and 4 NICs

Increase in dividend tax

The tax applied to dividend payments will increase by 1.25% from 6 April 2022.

If your investments are wrapped up in an ISA, you will not be charged dividend tax.

Inheritance tax reporting

Inheritance tax can be extremely complex for business owners. Working with an experienced Commercial Law Solicitor can make succession planning and tax planning run smoothly. There has been a change in the classification of an ‘exempted estate’ for the purposes of Inheritance Tax (IHT). If a person dies after 1 January 2022, their estate will be classed as exempted if it is:

• Valued below the IHT threshold
• Valued at £650,000 or less and any unused threshold is being transferred to the surviving spouse or civil partner
• Valued below £3 million and the deceased’s spouse or civil partner, who lives in the UK, is the sole beneficiary or the beneficiary is a qualified UK registered charity.

For overseas residents who die owning UK assets, the estate will be exempt from UK IHT if the UK assets are worth less than £150,000.

Capital gains tax reporting

If you have a buy-to-let investment or second home and it was sold after 27 October 2021, the time available for taxpayers to report any capital gains and pay any tax owing has increased from 30 days to 60 days.

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