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The costs of keeping the country running through covid were huge and inflation is expected to add to the country’s debt. The Office for Budget Responsibility has indicated that the treasury will need to find £45bn in interest, before even thinking about paying off the debt itself. As taxpayers we will be providing the extra cash!
From April, the Chancellor is not directly increasing the rates of income tax we pay, he is freezing the thresholds at which basic and higher rates of income tax are paid from April 2022 to April 2026, effectively increasing the amount we actually pay as inflation pushes up earnings.
There will also be an additional 1.25% contribution added to both employee and employer National Insurance from April and a similar additional charge on dividends. This is referred to as the Health and Social Care Levy. From April 2023 it will be extended to employees above the state pension age.
The changes will not end there. The Treasury has issued a raft of consultations which could all mean extra costs.
There will be greater scrutiny if you are self-employed, or if you become a new landlord, with the onus on you to report your new venture even before it turns a taxable profit.
There could also be increasing pressure for ‘timely payment’ or in other words, collecting tax sooner. This is still just a consultation at this stage, but the government is understandably keen to raise funds quickly.
These changes mean that it will be more important than ever to ensure that you are not paying too much tax – and there are two key areas to look at:
Are you claiming all your allowances?
Tax is complicated, and we may tend to simply rely on HMRC to tell us what we owe them. The fact is that they are only human and HMRC does make mistakes. In particular, they may have forgotten an allowance or two, particularly if your income has fluctuated over the past few months.
It can be well worth looking at your tax return. If you do find errors, there is a relatively simple way to query them. HMRC has a well-developed and surprisingly efficient appeals system which you can find here: https://www.gov.uk/tax-appeals/decision
Can you reduce your tax liabilities?
If you find that your current assessment is right, it might be time to take a more proactive approach to reducing your tax.
It could be time to:
These steps are all entirely legitimate, but the rules and regulations are complicated. Getting expert help may be vital.
Please contact us about planning for the April tax changes. We can provide a full tax review which will help identify the marginal tax traps waiting for you – and help you to avoid them.
Brearley & Co Accountants are pleased to offer a free, no obligation, initial consultation with one of our experts who will be happy to discuss your business needs and how we can help you.Contact