Changes From April 2022

With the new tax year comes several changes brought forward by HMRC. Here is a short guide to help you navigate the updates that may affect you and your business from April 2022.

 

Reduced VAT is Ending

The reduced VAT rate of 12.5% will be increasing back to its pre-COVID rate of 20%. The reduced rate was initially introduced in July 2020 at 5%, rising to 12.5% in October 2021, to help businesses within the hospitality sector to help with their finances after the drastic impact of the Coronavirus pandemic on their trade. This return follows the timeline set in the Spring 2021 budget.

VAT Surcharges

The changes to penalties and interest rules which were due to come in place from April 2022 has now been delayed to January 2023

Making Tax Digital

Making Tax Digital (MTD) will apply to all VAT-registered businesses from 1st April 2022. This means that, for any VAT periods starting on or after this date, VAT registered businesses must keep all of their VAT records digitally and submit VAT returns using software that is MTD accordant.

Changes to National Insurance

National Insurance (NI) is going to increase by 1.25% from 1st April 2022. Those receiving a State Pension will also receive a levy of 1.25%. This increase in tax will be in place until 31st March 2023 and has been put in place to help contribute to increased health and social care costs incurred over the pandemic.

New PAYE Thresholds

From year 2022-2023 to tax year 2025-2026, the personal allowance will be £12,570 per year

In England, Wales, and Northern Ireland the basic tax rate of 20% will be applied to annual earnings above the threshold, up to £37,700 a year. The higher tax rate will be 40% on annual earnings between £37,701and £150,000, with the additional tax rate of 45% will be applied to earnings above this.

In Scotland, their starter tax rate of 19% applies to earnings above the threshold and up to £2,162, the basic rate of 20% applies to annual earnings between £2,163 and £13,118, and the intermediate rate of 21% applies to annual earnings between £13,119 to £31,092. Scotland’s higher rate of 41% applies to annual earnings between £31,093 and £150,000, and the top rate applied to earning above this is 46%.

Increase on Statutory payments

Statutory maternity pay (SMP), Statutory paternity pay (SSP), Statutory parental pay (SPP), Statutory adoption pay (SAP) and bereavement pay will change on April 2022. All will see the weekly rate of statutory pay increase from £151.97 to £156.66 per week.

From 6th April 2022, the rate of statutory sick pay (SSP) will also increase from £96.35 to £99.35 per week.

Any employee who earns more than (or equal to) the lower earnings limit, that will increase to £123 on the same date, is entitled to statutory pay.

 

Please do not hesitate to contact us regarding any of the above changes and how they may impact your business

When should I register for VAT?

You should register for VAT if:

  • Your VAT taxable turnover for the previous 12 months is more than £73,000 (the current VAT registration threshold)
  • You think your VAT taxable turnover will exceed the threshold in the next 30 days
  • You exceeded a VAT threshold at an earlier point in time and have not registered for VAT
  • You take over a VAT-registered business as a going concern