Key tax changes – April 2022

Key tax changes – April 2022

There are many tax changes coming into force from April 2022 so we thought it was worth a quick highlight of the key updates and how they will impact your business.

VAT and Making Tax Digital

All VAT registered businesses must ensure they are set up for Making Tax Digital (MTD). The current MTD rules only apply to those businesses with a turnover of above £85,000 but from Friday 1^st April this rule will now apply to all VAT registered businesses.

So, what is MTD? MTD is a government initiative to ensure all VAT and tax records are submitted digitally through software that supports the system. From 1^st April 2022, this will now be mandatory and businesses that are VAT registered will no longer be able to submit their manual VAT returns. It is a much easier and quicker system and we use the fantastic Xero software. 

Dividend tax is going up

In order to help fund the costs of social care and the NHS, the government announced an increase in dividend tax which will begin on Friday 1^st April 2022. The new rates will be as follows:

Tax band        Existing rate      New rate

Basic               7.5%                   8.75%

Higher             32.5%                 33.75%

Additional       38.1%                39.35%

National Minimum Wage and Living Wage increases

The government has also announced an increase in the National Minimum Wage and Living Wage from Friday 1^st April 2022.

                                                Existing rate               New rate         Increase

National Living Wage          £8.91                           £9.50               6.6%

21-22 year olds                    £8.36                           £9.18               9.8%

18-20 year olds                    £6.56                           £6.83               4.1%

16-17 year olds                    £4.62                           £4.81               4.1%

Apprentice                            £4.30                           £4.81               11.9%

Employers do need to ensure they are paying the increased minimum pay levels otherwise they could face a penalty and the prospect of being named and shamed by HMRC.

National Insurance rise

In order to support the costs of social care and the NHS, the government announced an increase in National Insurance (NI). The change will see both employers and employees paying an additional 1.25% in NI. You can find out more about the impact of this increase here. 

Businesses are facing continuing pressures with increased energy and fuel costs. It is really important to factor these increased costs into your financial planning and reviewing your pricing strategy and the impact on cashflow.

Inflation is also at a record high with experts predicting a 40 year of 8.7% high by the end of 2022, with the war in Ukraine, Brexit and the pandemic all contributing factors. This in turn has seen an increase in the cost of living as food prices have also increased and salary costs are increasing due to an increased demand and shortage of labour.

Many other costs are set to increase on the back of this from rail fares, interest rates and TV and broadband packages. With businesses facing such a rise in costs just to keep going it will mean a knock-on effect with prices needing to go up in order to cover the extra expenditure.

Sean Daniel, Managing Director said “April 2022 sees quite a few increases to business costs. It’s essential to keep on top of these costs and prepare for their impact.”

If you would like a chat about how any of the upcoming tax changes will affect you, please get in touch with the friendly Clear Vision Financial Management team. You can call us on 01794 330025 or email us