Well, we survived our first month of 2022 relatively unscathed and with a much brighter outlook for the rest of the year than we started with.
With restrictions lifting, people returning to the office and businesses planning for what is expected to be a very lucrative year for growth, the Ellis & Co team are working away to ensure clients are effectively planning for both the end of the current tax year and into the next.
Tax planning for end of the financial year
As the 2021/22 tax year draws to a close, we are encouraging clients to consider whether they should make any further pension contributions or declare additional dividends before the deadline of 5 April 2022. With higher dividend tax being introduced from 6 April, it may be tax-efficient to pay dividends early – although by doing so any related tax charge will need to be paid a year earlier. Don’t forget that your annual pension allowance is lost after three years, so don’t miss out!
‘Super-deduction’ for companies
For companies purchasing brand new capital equipment, ensure you take advantage of the ‘super-deduction’ to reduce your corporation tax charge. Introduced in April 2021 and running until 31 March 2023, the super-deduction allows you to deduct 130% of the cost of any new plant or machinery from profits. In this case, the definition of plant & machinery would include assets such as laptops, furniture or even vans. Even better, there is currently no limit on the amount you can spend on this new equipment!
Upcoming tax changes
As mentioned above, from 5 April 2022 dividend tax rates are set to increase by 1.25% - so for a basic rate taxpayer dividends previously taxed at 7.5% will in future be taxed at 8.75%. Similarly, all National Insurance rates are rising by 1.25% at the same time. For companies, the corporation tax rate will increase from 19% to 25% for companies with profits above £250,000, with a new marginal rate of 26.5% for profits between £50,000 and £250,000.
We have had a busy yet productive tax season, and despite the challenges that 2021 and early 2022 have thrown at the Ellis & Co team (and of course the business world as a whole) we have successfully supported our clients through the completion of their tax return and planning for 2022/23.
If you’re looking for an established, local accountant to support you in the new tax year, get in touch the team at Ellis & Co today on 01244 343 504.