As we approach 5th April, and so the end of the 2021/22 tax year, we wanted to remind clients of the importance of reviewing your tax position. Here we focus on income tax, national insurance and capital gains tax.
Income Tax & National Insurance
The income tax personal allowance and higher rate threshold will remain frozen at £12,570 and £50,270 respectively until April 2026. However, the rates of income tax applicable to dividend income will increase by 1.25%. The dividend ordinary rate will be 8.75%, the dividend upper rate will be 33.75%, whilst the dividend additional rate and the dividend trust rate will be 39.35%.
An additional 1.25% Health and Social Care Levy will be added to the rates of National Insurance for employees and employers, including the self-employed, from 6 April 2022. From April 2023, this levy will be separated from the main National Insurance rates into a separate levy in its own right, meaning it will be payable by employees of pension age.
Capital Gains Tax
The annual exemption remains at £12,300. Gains above this level are taxed as follows:
- 10% if the gains qualify for Business Asset Disposal Relief (BADR) (previously Entrepreneurs’ Relief), up to a lifetime limit of £1 million;
- 10% if the gains qualify for Investors’ Relief, up to a lifetime limit of £10 million;
- 10% (18% for residential property or private equity carried interest) if the gains fall within the unused basic rate band; and
- 20% (28% on residential property or private equity carried interest) for gains above the basic rate band.
Assets transferred between married couples or civil partners do not normally give rise to a CGT charge.
We would encourage all clients to consider tax planning. Should you wish to discuss this further, please contact Jackie or Andrew.