Tax bills increase from April 2022
As announced in the 2021 Autumn budget, many tax payers will soon see higher tax bills for dividend income, along with national insurance hikes.
There are also changed to be aware of if you make a capital gain, or have to pay inheritance tax on someone's estate.
National Insurance threshold and rate changes
National Insurance rates are set to rise by 1.25% from 6 April 2022, as part of the government's plan to introduce a health and social care levy where working people contribute to fund the NHS and the social care crisis.
This will be taken along with the rest of your National Insurance payment in 2022-23, but the plan is to officially split out the levy from April 2023.
April 2023 will also be the point where the levy is paid by those who are above state pension age, but still in work.
The tables below show what National Insurance rates and thresholds are now in 2021-22 compared to what they will be in 2022-23 for employees and self-employed.
Employees paying Class 1 NICs
Self-employed paying class 2 and 4 NICs
If you are self-employed, you may have to pay Class 2 and 4 contributions- depending on how much you earn.
Class 3 NIC's
You may want to pay voluntary Class 3 contributions if you have any gaps in your national insurance record that might affect your eligibility for the state pension or other contribution based benefits.
Dividend tax rates to increase.
Similarly to the National Insurance rate rises, those who earn money from dividends will also see a 1.25% rise from April.
You may have to pay dividend tax if you're an investor that earns money from owning company shares; you're only charged tax on the amount you earn above the dividend allowances, which is £2,000 in 2022-23, unchanged from 2021-22.
The rate you pay depends on your income tax band, as shown in the table below:
Capital Gains tax reporting extended
Another announcement in the Autumn Budget 2021 affects anyone who makes a capital gain after selling a property.
Previously, there had been a window of just 30 days for taxpayers to report the gain and pay the tax owed- as of the budget on 27 October 2021- this was immediately increased to 60 days.
In practice, this means anyone who makes a capital gain after selling a second home or buy-to-let property will need to submit a residential property return to HMRC, and make a payment on account for the estimated tax owed within 60 days of the gain being made.
This is only for properties sold on or after 27 October 2021.
If you sold property between 6 April 2020 to 26 October 2021, you would have been required to report and pay the CGT within 30 days.
Richardson, D., 2022. Five tax changes you need to know about in 2022 – Which?. [online] Which? News. Available at: <https://www.which.co.uk/news/2022/01/five-tax-changes-you-need-to-know-about-in-2022/> (Accessed 31 January 2022).