For a general overview of all budget matters, the BBC’s summary here is as good as any.
Largely as expected, Chancellor Rishi Sunak’s budget focused on minimising the negative impact of the growing cost of living, fuel crisis and the huge impact that the war in Ukraine has on the UK and wider global economy. It was a fairly dry budget for contractors/freelancers with not much to report on, with some changes not planned to take effect until later in the tax year or beyond.
As always, we’ll focus on the tax related announcements most likely to be of relevance to our typical client. You can find our suggestions for tax efficient salary/dividend choices for 2022-23 (i.e. from 6 April 2022 onwards) here.
From 6 April 2022, the tax-free personal allowance will remain £12,570 with the basic rate band applying to the next £37,700. Some good news is that there is a plan to increase the NIC thresholds to align with the personal allowance. However, somewhat bizarrely this won’t come into place until 6 July 2022 and so won’t be fully aligned this tax year. This means that from 1 July 2022 the new NIC threshold will be £12,570 for employees, or £11,908 for directors, sole traders, and members of partnerships. Bad news is that the planned 1.25% increase in National Insurance for both employees and employers will go ahead from April 2022.
There is also a promise to cut income tax by 1% for basic rate taxpayers only before the end of the Parliament in 2024.
No change for the upcoming year and as announced in the last Budget we are expecting the corporation tax rates to rise to 25% from April 2023 for companies with profits more than £250,000. Companies with profits of £50,000 or less will still pay Corporation Tax at 19%, with the rate set to be tapered for those in between. Of course, these plans may well change depending on how the events in Ukraine unfold.
As planned the temporary super-deduction will end in Mar 2023.
Capital Gains Tax
The Capital Gains Tax annual exemption is due to remain at its current level of £12,300 for the next few years. This will be relevant for those making any gains on disposals of assets. Effectively, the first £12,300 of chargeable gains in a tax year will be tax free.
We are expecting CGT rates themselves for the coming tax year and to remain at their current levels.
There were no announcements made regarding Business Asset Disposal relief (previously entrepreneur’s relief).
From April 2022 onward, any decrease in VAT rates in the tourism and hospitality sector will be removed. FreeAgent will deal nicely with the change but perhaps worth flagging those receipts on meals away from your workplace, business entertaining and staff entertaining, etc. need to be checked and set at 20% in the unlikely event of FreeAgent not setting this up automatically.
– Fuel duty reduction of 5p/litre from 23 March 2022
– Zero-rating VAT for five years for homeowners installing energy saving materials such as solar panels, heat pumps, insulation etc. (previously 5%).
– Economy forecast to grow 1.8% in 2023, and inflation expected to reach 8.7% by the end of the year.