It is anticipated 2022 will be a challenging year for our finances. As a result of the global pandemic changes in tax were inevitable. UK households are under increasing pressure as costs continue to rise and the unavoidable raises in tax start to bite. It’s important you keep abreast on the latest tax changes so you can factor these into your personal budgeting.
What are the 5 Key Tax Changes for 2022?
1) Inheritance Tax
The change is essentially a reporting change, and is one that has come into effect at the start of the year. The new rule applies to anybody that dies from the start of 2022. It is focused on whether their estate can be classed as an ‘excepted estate’. This means the estate should not be reported, as long as there is no inheritance tax to pay.
To be eligible for an excepted state, it must:
- Have a value below the IHT threshold.
- Have UK assets worth less than £150,00 and the deceased had been living outside of the UK when they passed away.
- Be worth less than £3m and all value of the estate is left to a surviving partner, or to a UK charity.
- Be worth less than £650,000 and any unused threshold is being transferred from a spouse or civil partner who died first.
2) Natural Insurance Threshold & Rate Changes
As part of the Government’s plan to introduce a health and social levy, they have increased National Insurance Rates by 1.25 percentage points. This will come into effect from 6th April 2022. Click here for more information.
3) Dividend Tax Rates
Those that earn money from dividends will notice a 1.25% increase in taxes from April – similar to the National Insurance rises. The Dividend Tax Rate is dependent on which Income tax band you are on. For a basic rate taxpayer the rate will increase from 7.5% to 8.75%; for a higher rate it will increase from 32.5% to 33.75%; and for the Additional rate from 38.1% to 39.35%.
4) Capital Gain Tax
This is in relation to reporting the gain that was made on the sale of property, and the tax that is due. Previously taxpayers were allowed just 30 days to report the gain and pay the necessary tax. Now anyone that sells a second home or buy-to-let property, and makes a gain from it, will have 60 days to report that gain. The taxpayer is required to submit a residential property return within the new time period.
5) Scottish Income Tax
With Income Tax being devolved in Scotland, the Scottish parliament announced proposals to increase the tax threshold in April 2022. It is anticipated no Scottish taxpayer will pay more Income Tax in the 2022-23 tax year than they did in the previous tax year, on their current level of income.
Furthermore, taxpayers earning less than £27,850 will pay less income tax in 2022-23 compared to those living elsewhere in the United Kingdom. This will benefit 54% of taxpayers in Scotland, which is approximately 1.5 million people.
If you would like advice on your tax affairs please contact us. Call us on 0800 471 4546 or you can contact us here