Wednesday 6 April 2022 marks the start of a new tax year. For once, this doesn’t mean any changes to the personal income tax thresholds; the Chancellor has chosen to keep them frozen at the previous 2021-22 levels. Indeed, various tax rates, thresholds and allowances remain unchanged. However, two notable changes are:
1. Increase in the rate of dividend taxation
Previously, dividend income was taxed at 7.5% (basic rate taxpayers), 32.5% (higher rate taxpayers) and 38.1% (additional rate taxpayers). These rates are now 8.75%, 33.75% and 39.35% respectively. The tax-free dividend allowance for individuals remains unchanged at £2,000.
2. Increase in the rate of national insurance
National insurance has also been increased by 1.25% percentage points. The minimum thresholds where national insurance first becomes payable have also increased.
- Class 1 NI (for employees)
- Minimum threshold increased from £183 per week to £190
- £190 to £967 per week: 13.25% (increased from 12%)
- Over £967 per week: 3.25% (increased from 2%)
- Class 1 NI (for employers)
- Minimum threshold increased from £169 per week to £175
- Over £175 per week: 15.05% (increased from 13.8%)
- Class 2 NI (for self-employed)
- Minimum threshold increased from £6,475 per year to £6,725
- Flat rate of £3.15 per week (increased from £3.05)
- Class 4 NI (for self-employed)
- Minimum threshold increased from £9,500 to £9,880
- £9,500 to £50,000 per year: 10.25% (increased from 9%)
- Over £50,000 per year: 3.25% (increased from 2%)
Further changes will apply as from 6 July 2022. For further information, please see here.
Do you need to submit a tax return?
With the 2021-22 tax year now behind us, thought should be had as to whether you will need to submit a tax return to HMRC. If so, the deadline to do so electronically is 31 January 2023. You will need to submit a tax return if any of the following points apply (please note that this is not an exhaustive list):
- HMRC issue you with a notice to submit such a tax return
- You are self-employed and generate turnover in excess of £1,000
- You are a partner in a partnership
- You are a landlord and generate rental income in excess of £10,000 (or in excess of £2,500 after deducting allowable expenses)
- You have total income in excess of £100,000
- You have total income in excess of £50,000, and either you or your partner is receiving Child Benefit
- You have total interest and/or dividend income in excess of £10,000
- You have income tax to pay which cannot be collected through the PAYE system
- You have capital gains tax to pay
- You have capital losses to claim
- You have generated capital proceeds in excess of £49,200
- You have a particular tax relief to claim (unless such relief is given automatically, or can be claimed through other means)
If HMRC have not issued you with a notice to complete a tax return, but you have a reason for needing to submit one, you should inform HMRC by 5 October 2022. The electronic submission deadline will still be 31 January 2023.
How Moore Barlow can help
Should you require any assistance, such as preparing your tax return, please get in touch with Alex Wavell who is part of the Moore Barlow private wealth team.