There's a lot going on in the world of tax at the moment, and more to come in the next 12-18 months. Here's a quick rundown on some of the issues that could affect you a the moment...
Capital Gains Tax reporting
Last years’ Autumn Budget saw the announcement of the CGT reporting extension affecting everyone who makes a capital gain after selling property. Previously, the deadline was just 30 days for property sellers to report the gains made on a sale and pay the taxes owed. This has been increased to 60 days, meaning anyone who sells a second home or buy-to-let property has two months to submit a residential property return to HMRC and make the necessary tax payments. However, taxpayers should beware as this extension only affects properties sold on or after October 27, 2021, with those who have sold a property between April 6, 2020 and October 26, 2021 still being held liable to the 30 day rule.
National Insurance rates and threshold
On April 6, National Insurance rates are set to rise by 1.25 percent to help fund the Government’s plans for health and social care. This is a temporary rise which will be replaced in April 2023 by the health and social care levy which will be imposed on working pensioners too. The lower earnings limits for National Insurance contributions will also be rising by 3.1 percent with the upper earnings threshold being frozen for the time being at £50,270. Currently, class one rates are imposed on those earning between £9,568 and £50,270 per year, which will change to £9,880 and £50,270 per year. Class one contributions are currently 12 percent but will rise to 13.25 percent but for those earning over the upper threshold will see a rise from two percent to 3.25 percent.
Dividend tax rates
These rates are also due to rise by 1.25 percent in April, meaning investors that earn money from company shares above the unchanging threshold of £2,000 will need to pay tax depending on their income tax band. Those on the basic rate tax band will pay 8.75 percent instead of 7.5 percent, and higher rate earnings will pay 33.75 percent instead of the current 32.5 percent. Additional rate taxpayers will also see their rates climb from 38.1 percent to 39.35 percent.
Inheritance Tax Reporting
The new rule for inheritance tax (IHT) reporting came into effect at the beginning of 2022, concerning a change in how ‘excepted estates’ are classed. The rule change now means that excepted estates will not require heirs to report the estate’s value as long as no IHT is due and there is no other reason for it to be reported. For an estate to count as excepted after January 1, 2022, it must:
- Be valued below the IHT threshold
- Worth £650,000 or less with any unused threshold being transferred from a spouse or civil partner who has died worth less than £3million
- The deceased left everything in their estate to a surviving spouse or civil partner that lives in the UK or to a qualifying charity
- Have UK assets worth less than £150,000 with the deceased having permanently lived outside of the UK when they died.
