A year in tax; what changed, what stayed the same and what might lie ahead
As this year comes to an end – finally, I think we can all agree it’s been a long one! – we now look forward to what the next might bring. There is obvious folly in making overly confident predications, but when it comes to tax, we can make educated guesses, based on the biggest stories from the past 12 months.
So, here’s 2021’s year in tax, a year of increases and freezes, plans and postponements – with pain to come, perhaps? As the stage is set for 2022, let’s look back on what made the headlines.
1.25% increase in NIC and dividend tax rates.
From April 2022, there will be a temporary increase in NICs, affecting all employees, also self-employed workers, and employers. In April 2023, this will be replaced by the Health and Social Care Levy, announced to boost funding to this sector. Individuals over the state pension age, who are employed or self-employed, will not be exempt from the Levy.
Businesses, as well as individuals, will feel the impact, therefore, and this could signpost more tax increases to come.
Corporation Tax increase
This is set to increase in 2023 when the Health and Social Care Levy starts. A business with taxable profits up to £50,000 will stay on the existing rate and those with profits between £50,000 and £250,000 will pay the main rate (with a marginal relief), but the largest companies will see their corporation tax bill increase from 19% to 25%.
The rates of income tax, capital gains, and inheritance tax remained frozen. Also, the pension lifetime allowance, and residence nil rate bands, were frozen at their current rates.
Working from home tax relief
This relief is for costs not reimbursed by employers for 2021/22. On 8 December, the government reinstated its guidance to work from home, where possible, to slow down the spread of the Omicron variant, which could mean the relief is extended in the new year. What happens next depends a great deal on the situation with Omicron and the UK’s response to it; at time of writing this is very much unknown.
Return of duty-free limits on alcohol
This came in at the end of the Brexit transition period; bring alcohol into the UK that takes you over the duty-free limit you will now have to pay tax on all the alcohol, of that category. RIP the booze cruise!
HMRC’s fraud concerns
In particular, the tax office was concerned about fraudulent coronavirus support claims, also the number of fraudulent mini-umbrella companies, created to avoid tax.
A digital tax future
HMRC has restated its commitment to building a completely digital tax system, where processing, reporting, and paying tax can be done in real-time, or as close to real-time as possible. There was a snag this year however, when Making Tax Digital (MTD) was delayed further, with MTD for Income Tax now postponed until 2024. If you’re a business that wasn’t prepared, use this extra time to get organised! HMRC will now accept electronic signatures on some forms, including employment expenses, though – a small but bold step that underlines the one-way digital direction of future tax travel.
Need help with your tax planning in 2022 and beyond?
Give Figurit a call. We can help you plan, to get yourself in a good position – with some room for flexibility – for optimising your business and personal finances.
For help with business or personal tax planning, call Figurit (formerly known as Lansdell & Rose) on 020 7376 933 or complete the form below.