Know Your Personal Tax Position in 2022

With the new tax year well underway, here is an overview of the key personal taxes and tax changes you need to know in 2022/23.

The Government is intent on decreasing the national deficit and inflation after spending billions tackling the pandemic. Add this to the impact of Brexit, global supply chain issues and energy price increases, and it’s more important than ever to know what changes have been made so you can plan accordingly.

Income tax and personal allowance

Below are the Scottish income tax thresholds, with the personal allowance of £12,570.

 

2021/22 2022/23
Starter (19%) Over £12,570-£14,667 Over £12,570-£14,732
Basic (20%) Over £14,667-£25,296 Over £14,732-£25,688
Intermediate (21%) Over £25,296-£43,662 Over £25,688-£43,662
Higher (41%) Over £43,662-£150,000 Over £43,662-£150,000
Top (46%) Above £150,000 Above £150,000

National Insurance contributions

National Insurance contributions (NICs) increased by an extra 1.25% in September 2021 for the 2022/23 tax year. The rise in NICs will only be in place for 2022/23, after which point it will be replaced by a 1.25% ‘health and social care levy’ that will be included on payslips. From 6 July, the threshold at which workers start paying NICs will rise to £12,570, in line with the personal allowance.

Dividend tax

Tax on dividends will also increase for the 2022/23 financial year by 1.25%.

The new rates for dividend tax are:

  • basic rate: 8.75% (up from 7.5%)
  • higher rate: 33.75% (up from 32.5%)
  • additional rate: 39.35% (up from 38.1%).

The rate at which you pay tax on your dividends above your tax -free dividend allowance of £2,000 depends on which income tax band you are in.

Inheritance tax

The inheritance tax nil rate (£325,000) and residential nil rate band (£175,000) are also both frozen for the next four years, as is the pensions lifetime allowance at £1,073,100. With rising house prices, it’s likely more estates will be caught in the inheritance tax net.

Estates of someone who dies after 1 January 2022 can be classed as ‘excepted’ and will not require heirs to report the estate’s value – so long as there’s no inheritance tax to pay, or any other reason why the estate should be reported.

To count as an excepted estate, it must:

  • have a value below the inheritance tax threshold
  • be worth £650,000 or less and any unused threshold is being transferred from a spouse or civil partner who died first
  • be worth less than £3 million and the deceased left everything in their estate to their surviving spouse or civil partner who lives in the UK, or to a qualifying registered UK charity
  • have UK assets worth less than £150,000 and the deceased had permanently been living outside the UK when they died.

Capital gains tax

The capital gains tax allowance has also been frozen at its current amount (£12,300 a year for individuals) until 2026. The allowance will not rise with inflation, which means that gains on the sale of a second home or shares that are not in an ISA, are more likely to face a tax charge in the future.

The deadline to report and pay capital gains tax is now 60 days on UK residential property disposals that are not your main residence.

Our specialist tax team can help with any tax planning you require. Email info@thomsoncooper.com to arrange a meeting.

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