Year-end tax planner 2021-22

8 Feb 2022

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Those who hoped that 2021 would mark a significant improvement on the uncertainty of 2020 may have been disappointed. The pandemic continued to cast a long shadow over the world, even as we began to move towards a new normal. Though the Office of Budget Responsibility predicted in October 2021 that the economy would return to its pre-COVID level by 2022, this was before the effects of the Omicron variant caused further disruption.

With this in mind, the government has chosen a package of tax measures to support a strong economy, and, as could be predicted, this includes future tax rises. The biggest change, in terms of revenue raised, is the introduction of the new 1.25% Health and Social Care Levy, initially as an increase in National Insurance contributions (NICs) for employees, employers, and the self-employed. This will be accompanied by a 1.25% increase in the rates of dividend tax.

Taken together, these increases are expected to raise an additional £18.7 billion a year by 2026-27. Also, from 1 April 2023 the corporation tax rate is set to increase to 25%.

There are also some changes to tax administration and rules. The government’s plans to change the basis period rules, which govern when income is taxed for certain businesses, will proceed as planned, with a transitional year in 2023-24.

This will require significant changes in how businesses account for taxable profits where they do not have an accounting date that matches the UK tax year end date – click here for more details.

There had been predictions, following the Office of Tax Simplification’s (OTS’) review into the UK’s capital gains tax (CGT) and inheritance tax (IHT) regimes, that change in these areas was on the horizon. However, the government has now responded to these reviews, stating that they will not be undertaking major reform in either area (albeit they will be making some relatively minor changes to CGT).

Aside from the upcoming future changes, now is a good time to review your tax position, to ensure that you are making the most of the reliefs and allowances available to you in the current tax year, and that you are ready for the next. We hope the information provided here will assist you in deciding what actions to take to improve your tax position before the end of the tax year.

We have split our year-end tax planner into six sections so you can find the relevant section for you and/or your business: