April 2022 is fast approaching, and with that comes changes to VAT, NIC, and dividend taxes. We’ve also got electricity and wage increases to consider. The clock is ticking, so what do you need to do, to get ready for the April 2022 increases?
The latest Budget announced quite a few unwelcome changes to tax and NIC rates, and also the end of certain allowances, so let’s take a look at what’s changing, and what you can do now to get ready.
What is going up?
1. VAT for Hospitality rises from 12.5% to 20%
- This is from 1 April 2022, and means sales previously at 12.5% will now be at 20%.
What you need to do:
- You will be paying 7.5% more to the VAT office on your next VAT return after 1 April, so make sure that you can afford this.
- Consider putting your prices up to cover the increase.
- Update your menus, make time for these to be edited and printed if you need to.
- Check your website is up to date.
- Make sure you update your EPOS and sales systems and accounting software on 31 March!
- Check our blog on the VAT changes for hospitality and retail businesses.
2. NIC for Employers, Employees and Self Employed rises by 1.25%
- This means an increase for employees by 1.25% (previously 13.25%)
- Employers will also pay an extra 1.25% (increase to 15.05%)
- Self Employed will increase to 10.25%
- Self Employed weekly NIC (the stamp) stays the same at £3.05 per week
What you need to do:
- Check out our separate blog on the wage and NIC increases which goes into more detail.
- Notify your employees of the increase.
- Make sure that you can afford the increase.
- Increase the amount you put aside for your national insurance and taxes.
- We always recommend a separate deposit account for tax savings.
- Make sure your payroll software is up to date.
- Add a message to your employees’ payslips to notify them of the increase.
3. Dividend Tax rises by 1.25%
- Basic rate dividend tax rises to 8.75%
- Higher rate dividend tax rises to 33.75%
- Additional higher rate dividend tax rises to 39.35%
What you need to do:
- Consider taking more dividends before 5 April 2022, to make the most of the lower dividend rates.
- Speak to your accountant or tax advisor to see the impact for you.
- Check out our blog on the full changes to dividend tax and ways to reduce your personal tax before the end of the tax year.
4. Overdrawn Directors’ Loan Account tax rises by 1.25%
- If you owe your company, this is an overdrawn loan account, and means you’ve taken more out of the company than you should have.
- Your company will now pay 33.75% on the overdrawn balance, instead of 32.5%.
- This tax is paid back to the company as the loan is repaid.
What you need to do:
- It’s always good practice to keep your directors’ loan account in credit, so that the company owes you, and you don’t owe the company.
- See what you can do now to reduce this overdrawn balance. Can you pay funds into the company, or vote dividends to cover the overdrawn balance?
- Bear in mind that you have until 9 months after your company year end to clear the overdrawn balance.
- Speak to your accountant or tax advisor to see how you are affected, and what you can do.
5. National Minimum Wage rises from 1 April 2022
The following increases will go ahead from 1 April 2022
- National Living Wage: £9.50 (previously £8.91)
- Apprentice Rate: £4.81 (previously £4.30)
Check out our blog with more detail, including different rates for different ages.
What you need to do:
- Make sure you have factored in pay rises to your budgets and forecasts.
- Communicate the rises to your employees.
- Check whether any employment contracts or employee handbooks need updating.
- Update your payroll software (or inform your payroll providers)
- Consider price increases to cover these increases.
6. Electricity price rises
Ofgem is increasing the cap on energy tariffs from 1 April 2022.
This means that gas and electricity is likely to increase for businesses and households alike, on average between £600 and £800 per year.
Households will receive an upfront discount worth £200 this Autumn.
What can you do now?
Make sure you’re doing all you can to save energy in your home and work environment.
Keep an eye on energysavingstrust.org they have loads of useful guidance including how to save money on your energy bills.
What reliefs will there be?
Business rate relief of 50% for hospitality, retail and leisure
- This should include all hospitality businesses, and also gyms, hotels, and bowling businesses.
Relief for qualifying improvements to property
- From April 2023, businesses making improvements to their property to enhance productivity should get no increase to their rates for 12 months after.
- This include projects such as extending a factory, or adding more rooms to a hotel.
What is staying the same?
- Annual Investment Allowance (AIA) stays at £1m to March 2023
- We also have the Super Deduction allowance which is an extra 30% on eligible assets
- Business Rates are staying the same for 2022/2023
- Business recovery loan scheme extended to 30 June 2022
- Income tax thresholds are staying the same:
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- The personal allowance remains at £12,570
- Higher rate threshold remains at £50,270
- (this means the basic rate threshold is £37,700 (£50,270 less £12,570)
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- Savings and dividend tax free allowances:
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- £2,000 tax free dividends each year
- £1,000 tax free interest each year (£500 for higher rate tax payers)
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- VAT threshold stays the same at £85,000
How we can help
There are a lot of changes coming into force in April, and it’s vital that you know which of these affect you and how.
We can work with you to identify changes affecting you, and what this means to you, in terms of changes to your profits and cash in the bank, and how you’re paying tax.
Check out our blogs on how to reduce your personal tax and your business tax.
Get in touch now to make sure you’re prepared!
