Will Farmer FMAAT 
January 22, 2022

Upcoming Tax And Compliance Changes From April 2022

Extension of Making Tax Digital (MTD) for VAT

MTD for VAT requires businesses to keep digital records and use third party software to submit VAT returns. Currently, MTD rules only apply to businesses with revenues above the VAT registration threshold of £85,000 per year. From April, MTD for VAT will apply to VAT registered businesses with a turnover below £85,000 per year. 

 

New VAT Points Based Penalty System

Upcoming changes to be introduced by HMRC are designed to be fairer to those who occasionally miss deadlines but will be more punitive for those who repeatedly file late VAT returns.

Points will be accrued for late filed VAT returns will penalties issued once a points threshold has been reached (Annual Returns - 2 points, Quarterly Returns - 4 points, Monthly Returns - 5 points). The businesses VAT points record will be available to view from the businesses online portal (government gateway) making the issuing of penalties more transparent. 

 

Return To 20% VAT Rate For Tourism, Leisure And Hospitality Businesses

The temporary rate of 12.5% introduced as part of covid-19 business relief measures is planned to end in April. This will have an impact beyond the tourism, leisure and hospitality sectors will prices set to increase - impacting upon the costs to other businesses and consumers. 

 

1.25% Increase In National Insurance And Dividend Tax Rates

From April a new "health and social care levy" will be introduced that increases the rate of Class 1 and Class 4 National Insurance (NI) tax rates as well as Dividend Tax by 1.25%. 

Class 1 NI is paid by employees via PAYE, Class 4 NI is paid by the self-employed via the annual self-assessment tax return. 

The new dividend tax rates from April are as follows;

– 8.75% for dividend income falling within the basic rate band (income of £14,570 to £50,270)
– 33.75% for dividend income falling within the higher rate band (income of £50,270 to £150,000)
– 39.35% for dividend income falling within the additional rate band (income of £150,000 and over)

 

Other Upcoming Changes Beyond April 2022

- The Corporation Tax rate will increase to 25% for profits above £250,000 from April 2023 with reliefs for profits below £250,000. 

- Extension of the R&D Tax Credit Scheme from April 2023. 

- Extension of the AIA (annual investment allowance) level for corporation tax returns, this will remain at £1m until at least 2023. 

- Green Investment Relief with details to be announced, expected from 2023.

- MTD for Self-Assessment (MTD for ITSA) expected from April 2024. Read our blog on this topic here - https://www.matrix-accounts.com/blog/799341_making-tax-digital-for-self-assessment-mtd-for-itsa

 

The VAT registration and de-registration thresholds will remain at £85,000 and £83,000 respectively until at least April 2024. 

In addition, there are no plans to increase the personal allowance (£12,570) or higher rate tax thresholds (£50,270) until April 2026. These thresholds have increased significantly in recent tax years so keeping the thresholds frozen is a significant measure. The personal allowance increased from £6,475 in the 2010-11 tax year to £12,500 for 2020-21.