Apr 25, 2022 | CODIE SMITH
Happy New Tax Year!
It doesn’t quite have the same ring to it as Merry Christmas or Happy Birthday, but the new tax year is a significant annual event. With the start of the new tax year new tax allowances and changes come along without fail. With 2022 set to be pretty tough on our finances, it’s important to make sure you’re clued up on those changes to keep the 22/23 year to be as tax efficient as possible.
Announced last year, what changes will we be seeing?
Dividend tax rates are increasing by 1.25%
Those that earn dividends will see a 1.25 percentage point rise from April. The dividend tax free allowance will remain unchanged at £2,000. The new tax rates will look like this:
National insurance rates are increasing by 1.25%
Similarly, to dividend tax rates, you’ll see an increase to national insurance by 1.25 percentage points.
The rise in NICs will only be in place for 2022/23. After this it will be replaced by a 1.25% ‘health and social care levy’ (where working people contribute to fund the NHS and social care crisis) that will be included on payslips.
The national insurance tax threshold is increasing to £12,570
But not until July. So until then, it won’t cushion the tax rises.
The increase is in line with the personal allowance.
Income tax thresholds are staying the same
And won’t increase to account for inflation. Meaning you won’t pay more tax but it will feel like it due to rising prices – critics often refer to freezes as a “stealth tax”.
Other points to be aware of, which we’ll pick up with you at your Annual Progress meetings:
Nevertheless, it’s not all doom and gloom with ever increasing prices and frozen allowances. There are still ways we can be smart with our money and here are some of available allowances to you, now we’ve entered 22/23:
ISA allowances – the allowance remains unchanged at £20,000 per individual. This can be used across a cash ISA and stocks and shares ISA.
Lifetime ISA allowances – as previous years, you’ve a £4,000 allowance, so long as you meet the criteria to hold a LISA. The allowance falls part of your overall ISA allowance.
Junior ISA allowances – you can contribute £9,000 into a Junior ISA per child.
Top tip: if your child is aged 17 and 18, they can utilise both their adult ISA and junior ISA allowances. We’ll pick this up with you at our Progress meetings.
And finally, pension allowances – as an individual you can contribute between £4,000 to £40,000 depending on levels of income, plus any unused carry forward from the previous three years.
Top tip: If you’ve had a tapered annual allowance and unused allowances from the previous three years, be sure to pick up the 2019/20 tax year. This was the last year a fully tapered annual allowance was £10,000, rather than £4,000. Mop up that year before it drops away on 6 April 2023.
As the world opens back up, we look forward to our postponed holidays, activities and adventures with the family, that delayed 50th birthday celebration. Who can blame us, we deserve it! At Cooper Parry Wealth, we encourage you to make life count and whilst it’s important to satisfy our present self, we remind clients to be mindful of their future selves too.
Plan your spending for the year ahead and don’t forget to budget for the above allowances. Your future self is looking forward to that big holiday too.
Don’t worry we have you and your financial plan covered. If you have any questions, don’t hesitate to get in touch.
This communication is for general information only and is not intended to be individual advice. You are recommended to seek competent professional advice before taking any action. The information represents our understanding of law and HM Revenue & Customs practice as at 25 April 2022 and may change if legislation changes. Tax planning is not regulated by the FCA.
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