UK Tax Changes You Need to Know About in 2022

Most UK taxpayers have seen their tax bills increase from April 2022. The British government has said this is to help pay for COVID-19 related expenses on the national health service. But some tax experts believe it is also to fund other priorities, such as infrastructure spending.

While the increase in the personal allowance will help some people, others will be worse off as a result of the changes. The information below shows how the different tax bands will change from April 2022.

Personal Allowance Changes

The big changes include:

The personal allowance, which you can earn before paying income tax, will be frozen at £12,570 from April 2022 until 2026. This is worth an extra £80 a year in tax for those on the basic rate of income tax.

The higher rate threshold – the point at which you start paying the 40% rate of income tax – will also be frozen at £50,270 from April 2022 until 2026. This is worth an extra £200 a year in tax for those on the higher rate of income tax.

The additional rate threshold – the point at which you start paying the 45% rate of income tax – will be frozen at £150,000 from April 2022 until 2026. This is worth an extra £500 a year in tax for those on the additional rate of income tax.

National Insurance Changes

There will also be changes to national insurance. The main changes are:

The Class 4 national insurance threshold will be frozen at £9,568 from April 2022 until 2026. This is worth an extra £104 a year in National Insurance for those with a higher income tax rate.

The Class 2 national insurance threshold will be frozen at £6,824 from April 2022 until 2026. This is worth an extra £54 a year in National Insurance for those on the higher income tax rate.

Capital Gains Tax Changes

There will also be changes to the way capital gains tax is calculated. The main changes are:

The Capital Gains Tax exemption for private residence relief will be reduced from £1 million to £500,000 from April 2022. This is worth an extra £2,500 in capital gains tax for those on the higher income tax rate.

The Capital Gains Tax annual exempt amount will be frozen at £12,300 from April 2022 until 2026. This is worth an extra £61 a year in capital gains tax for those on the higher income tax rate.

From April 2022, the capital gains tax rates will be increased from 20% to 28% for higher rate taxpayers and from 10% to 18% for basic rate taxpayers. This is worth an extra £1,000 in capital gains tax for those with a higher income tax rate.

Inheritance Tax Changes

The changes to Capital Gains Tax will also affect the way Inheritance Tax is calculated. 

The main changes are:

The Inheritance Tax nil-rate band will be frozen at £325,000 from April 2022 until 2026. This is worth an extra £1,600 in Inheritance Tax for those with a higher income tax rate.

From April 2022, the inheritance tax rates will be increased from 20% to 28% for higher rate taxpayers and from 10% to 18% for basic rate taxpayers. This is worth an extra £2,000 in Inheritance Tax for those with a higher income tax rate.

What should you do?

If you are a taxpayer, it is important to be aware of the changes that are taking place from April 2022. Whether you are an Amazon Seller just starting out or a experienced Limited company director, these changes could affect the amount of tax you pay. As a result, you may need to adjust your finances to make sure you are paying the right tax. If you have any questions about the changes, you should speak to a qualified tax adviser. Get in touch with F9 today on 0800 169 3278

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