{"id":4820,"date":"2022-02-23T16:59:59","date_gmt":"2022-02-23T16:59:59","guid":{"rendered":"https:\/\/www.langricks.com\/?p=4820"},"modified":"2022-02-24T09:42:50","modified_gmt":"2022-02-24T09:42:50","slug":"the-top-5-tax-matters-to-consider-before-5th-april-2022","status":"publish","type":"post","link":"https:\/\/dev.withcreative.co.uk\/langricks\/the-top-5-tax-matters-to-consider-before-5th-april-2022\/","title":{"rendered":"The top 5 tax matters to consider before 5th April 2022"},"content":{"rendered":"<p>At this time of year and with just a few weeks until the end of the <strong>2021\/22<\/strong> Tax Year our Tax Experts have identified <strong>The Big 5 <\/strong>tax planning opportunities which you should consider over the next few weeks.<\/p>\n<h2><strong>Dividend tax rate increases and accelerating dividends<\/strong><\/h2>\n<p>From 6<sup>th<\/sup> April 2022, the rates of tax on dividends will increase by <strong>1.25%<\/strong> for all tax bands, taking them to 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers and 39.35% for additional rate taxpayers.<\/p>\n<p>This is the <strong><em>dividend tax equivalent<\/em><\/strong> of the <strong>Health and Social Care Levy <\/strong>that will increase national insurance for employees, employers and the self-employed by the same percentage point from the same date.<\/p>\n<p>Bringing dividends <strong>forward<\/strong> into the 2021\/22 tax year may save shareholders the additional 1.25% tax, provided their income for this tax year doesn\u2019t cross into a higher dividend tax band as a result. It is worth noting however, that the tax payable on these dividends will also be sooner, <strong>due on 31<sup>st<\/sup> January 2023 rather than 31 January 2024 <\/strong>for a dividend payable post 5 April 2022<\/p>\n<p><strong><em>For example, a director who has \u00a320,000 of their current tax band remaining could save \u00a3250 by paying a dividend of this amount prior to 6<sup>th<\/sup> April 2022 instead of later.\u00a0 <\/em><\/strong><\/p>\n<p>Get in touch if you would like to see whether you could save the additional 1.25% tax by paying dividends in advance of the dividend tax rate increase on 6<sup>th<\/sup> April 2022.<\/p>\n<h2><strong>Pension Contributions<\/strong><\/h2>\n<p>Increasing your pension contributions is an effective way of reducing tax liabilities from the perspective of both an individual and a company.<\/p>\n<p>Basic rate tax relief is given automatically on <strong>personal pension contributions<\/strong>, but higher and additional rate taxpayers will also obtain benefit.\u00a0 This is achieved by the basic rate tax band being extended by the gross pension contributions, which essentially means that more of your income is taxed at 20% before you reach the 40% band, which for <strong>2021\/22<\/strong> starts at <strong>\u00a350,270<\/strong><\/p>\n<p>If you own your own company, then making a company pension contribution is a tax efficient method of extracting money from the company.\u00a0 The contribution is an allowable expense for the business which will save corporation tax at a rate of at least 19%. For you personally, there is no immediate tax to pay, which is not the case if money is withdrawn as salary or dividends.<\/p>\n<p>There are limits to the amount of contributions that can be made during a tax year, which are dependent on numerous factors.\u00a0 Please contact us if you would like more information about how to maximise your contributions.<\/p>\n<h2><strong>Marginal Rates of Tax<\/strong><\/h2>\n<p>Not many taxpayers like having to pay tax at any level but if you are suffering at a marginal rate, it can feel even worse.<\/p>\n<p>Individuals who have taxable income <strong>over \u00a3100,000<\/strong>have their personal allowance reduced by \u00a31 for every \u00a32 of net income.\u00a0 <strong><em>This means that their income between \u00a3100,001 and \u00a3125,000 is effectively being taxed at 60%.<\/em><\/strong><\/p>\n<p>Similarly, individuals who earn <strong>between \u00a350,000 and \u00a360,000<\/strong> and either they or their partner are claiming <strong>child benefit<\/strong> can also be hit by another high marginal rate of tax.\u00a0 For every \u00a3100 of income over \u00a350,000 there is a charge equal to 1% of the family\u2019s child benefit. <strong>This can equate to a marginal rate of circa 64% in certain circumstances.<\/strong><\/p>\n<p>It is not just individuals that have to worry about marginal rates of tax either.\u00a0 The increase in the corporation tax rates from 1<sup>st<\/sup> April 2023 means that companies will also be affected.\u00a0 Companies with profits of \u00a350,000 or less will be taxed at 19%.\u00a0 Companies with profits of greater than \u00a3250,000 will be taxed at 25%.\u00a0 However, companies with profits between \u00a350,000 and \u00a3250,000 will be taxed at an effective rate of 26.5% on their income in this band.<\/p>\n<p>If you believe you are going to be paying a marginal rate of tax then please contact us to see how we can remove or reduce the amount of marginal tax being paid.<\/p>\n<h2><strong>Inheritance Tax<\/strong><\/h2>\n<p>Every individual for tax year 2021\/22 will have an annual exemption of <strong>\u00a33,000<\/strong> and it can be used to cover lifetime gifts up to this amount. If it\u2019s not used you can use it in the next tax year (only) provided the level of gift is \u00a36,000 or more.<\/p>\n<p>Or to put it another way \u2013 if you want to make a gift to family member in March 2022 of say \u00a310,000 \u2013 you will be able to use the annual exemption for the current tax year (2021\/22) first and then the previous year\u2019s exemption (2020\/21).<\/p>\n<p>Many clients will want to make gifts to their family at a much higher level than \u00a33,000 per tax year. The ability to make significant gifts \u2013 called<strong> Potentially Exempt Transfers <\/strong>(or PET\u2019s for short) should not be overlooked and provided you survive such gifts by 7 years large savings in IHT can be achieved.<\/p>\n<p>In some circumstances, surviving a larger lifetime gift by only 3 years + 1 day can produce IHT savings under the Taper Relief provisions.<\/p>\n<p>For those clients with family businesses, it is important to review the requirements of <strong>Business Property Relief (BPR)<\/strong> on a regular basis \u2013 this valuable relief which provides exemption at<strong> 100%<\/strong> can often be over-looked until it is too late and we would recommend that all key shareholders aged 50 + review their current situation in order to benefit from this very generous IHT relief.<\/p>\n<h2><strong>Capital Gains Tax<\/strong><\/h2>\n<p>Similar to the Income Tax Personal Allowance every taxpayer also has a CGT annual exemption \u2013 currently for 2021\/22 of <strong>\u00a312,300.\u00a0 <\/strong>It\u2019s what we call a \u201cuse it or lose it\u201d exemption \u2013 if you don\u2019t realise any chargeable gains in this tax year that exemption is lost and cannot be carried forward to a future tax year.<\/p>\n<p>So how might you (or your spouse\/Civil Partner) use the annual exemption:<\/p>\n<p>1.\u00a0Consider a sale of shares from your investment portfolio sufficient to create a gain of &gt; \u00a312,300<\/p>\n<p>2.\u00a0If you have \u201cfully paid\u201d shares following the exercise of a share option consider a CGT review prior to 5 April 2022<\/p>\n<p><em>OR<\/em><\/p>\n<p>3.\u00a0If you have decided to exit the Buy to Let property market (for whatever reason) look to \u201cdouble up\u201d on this exemption by making the sale in joint names with your spouse of Civil Partner.<\/p>\n<p>Finally, a note of caution \u2013 currently the CGT rates of <strong>20% and 28%<\/strong> (the latter may apply to the disposal of interests in residential property) are very attractive and it would be very easy for the Chancellor of the Exchequer to increase these rates in his next Budget announcement on 23 March 2022.\u00a0 It\u2019s not so long ago that CGT rates were <strong>aligned<\/strong>with your Income Tax rate of 20%,40% and 45% and this could easily happen again. If he does make an announcement to increase CGT rates they \u201cmight\u201d be applicable from midnight on <strong>23 March 2022<\/strong>. Watch this space ?!!<\/p>\n<hr \/>\n<p style=\"text-align: left;\" align=\"center\"><strong>We&#8217;re here to help&#8230;<\/strong><\/p>\n<p style=\"text-align: left;\" align=\"center\">If you need any help or support with the above tax issues please <a href=\"https:\/\/www.langricks.com\/contact\/\">get in touch\u00a0<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>At this time of year and with just a few weeks until the end of the 2021\/22 Tax Year our Tax Experts have identified The Big 5 tax planning opportunities which you should consider over the next few weeks. Dividend tax rate increases and accelerating dividends From 6th April 2022, the rates of tax on [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":4826,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"content-type":"","footnotes":""},"categories":[1],"tags":[],"class_list":["post-4820","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog-articles"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.0 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>The top 5 tax matters to consider before 5th April 2022 - Langricks Chartered Accountants and Business Advisers<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/dev.withcreative.co.uk\/langricks\/the-top-5-tax-matters-to-consider-before-5th-april-2022\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The top 5 tax matters to consider before 5th April 2022 - Langricks Chartered Accountants and Business Advisers\" \/>\n<meta property=\"og:description\" content=\"At this time of year and with just a few weeks until the end of the 2021\/22 Tax Year our Tax Experts have identified The Big 5 tax planning opportunities which you should consider over the next few weeks. 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