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Tax Year Transition – How does it affect you?
Tax Year Transition – How does it affect you?

 

The 2022/23 tax year started on Wednesday 6th April, marking a new financial period. 

A series of tax changes are being introduced this month, although not all of them coincide with the beginning of the new tax year, with some having already been introduced.

Here’s everything you need to know.

 

 

How does the end of the tax year affect you?

 

When tax year ends, you should be notified by HMRC if you are required to fill out a return.

If you are newly self-employed, you will need to register with HMRC for tax and national insurance (NIC) for this to happen.

You must send a tax return if, in the last tax year, you were self-employed as a “sole trader” and earned more than £1,000 (before taking off anything you can claim tax relief on) or were a partner in a business partnership.

You can check if you need to fill out a tax return using this tool.

The deadline for filing your 2021/22 tax return online will be 31st January 2023, or 31st October if you are submitting a paper return. 

If you miss the January deadline to pay your tax bill, you will incur 2.7 per cent interest on what you owe from 1st February, rising to three per cent from 21st February. If you submit your return after midnight on 28th February, you will incur a £100 late fine.

Payments on account are advance tax payments made twice a year by self-employed self-assessment taxpayers, to spread the cost of the year’s tax.

They are calculated based on your previous year’s tax bill, amounting to roughly half of the previous year’s tax bill.

The first payment on account will be due on 31st January 2023, while the second will be due on 31st July.

 

 

How does the new financial year affect you?

 

It was previously announced that a UK-wide 1.25 percentage point increase in national insurancecontributions will be introduced from 6th April, with funds raised ring-fenced for health and social care.

Employees previously paid 12 per cent on earnings up to £50,270 and two per cent on anything above that. From April 6th, the rate goes up to 13.25 per cent and 3.25 per cent respectively.

For the self-employed, rates will go up from nine per cent and two per cent to 10.25 per cent and 3.25 per cent.

Payments will only be collected on wages above £9,880, although this rises to £12,570 in July – a threshold rise announced by chancellor Rishi Sunak at the recent spring statement.

Those who earn money from dividends will also see a change in the 2022/23 tax year rates, as the rates at which they are taxed increases by 1.25 per cent, which applies to all dividends declared on or after 6th April.

The cost of buying a pub meal, soft drink or hotel stay will also likely become more expensive this month, as VAT levels across the hospitality sector were lifted back to 20 per cent on 1st April.

The industry saw VAT dropped to five per cent to support its recovery during the pandemic.

Retail, hospitality and leisure businesses were supported during the pandemic with financial help including a break to the business rates property tax.

The tax break in England has been steadily unwound with businesses receiving a 66 per cent reduction of their rates up to £2m per firm over the past nine months.

This was scaled back to a 50 per cent reduction with a cap of £110,000 per business on April 1st.

Council tax was also increased by an average of 3.5 per cent across the UK on 1st April, taking bills to nearly £2,000 for band D properties, according to new data.

 

 

Contact Gow & Partners

 

Why not beat the January rush by submitting your financial correspondence to our trusted team today? We will get the ball moving immediately, filing your tax return promptly to put your mind at ease.

Simply call 01254 589799.

Alternatively, you can fill in a contact form, or send us an email at info@gowandpartners.co.uk.