With 2022 set to be pretty tough on our finances, it's important to make sure you're clued up on the latest tax changes so you can plan ahead and avoid any fines for getting it wrong.
As announced in the 2021 Autumn Budget, many taxpayers will soon see higher tax bills for dividend income, along with National Insurance hikes - despite calls for the government to call them off.
There are also changes to be aware of if you make a capital gain, or have to pay inheritance tax on someone's estate.
Here, Which? explains what the tax changes are, and how they could affect your tax bill.
National Insurance rates are set to rise by 1.25 percentage points from 6 April 2022, as part of the government's plan to introduce a health and social care levy where working people contribute to fund the NHS and the social care crisis.
This will just be taken along with the rest of your National Insurance payment in 2022-23, but the plan is to officially split out the levy from April 2023.
April 2023 will also be the point where the levy is paid by those who are above state pension age, but still in work.
The National Insurance lower earnings limits will increase by 3.1% - in line with September 2021 CPI inflation. Upper earnings thresholds, however, are being frozen at £50,270. This means you'll be able to keep more of your money before kick in, offsetting some of the effects of the rate rises.
The tables below show what National Insurance rates and thresholds are now in 2021-22 compared to what they will be in 2022-23 for employees and the self-employed.
Here's what employees paying Class 1 National Insurance will pay:
|Earnings threshold||Class 1 rate||Earnings threshold||Class 1 rate|
|Less than £9,568||0%||Less than £9,880||0%|
|More than £50,270||2%||More than £50,270||3.25%|
|Profits threshold||Class 2 and 4 rates||Profits threshold||Class 2 and 4 rates|
|Less than £6,515||0%||Less than £6,725||0%|
|£6,515-£9,568||£3.05 per week (Class 2)||£6,725-£9,880||£3.15 per week (Class 2)|
|£9,568-£50,270||9% + £3.05 per week||£9,880-£50,270||10.25% + £3.15 per week|
|More than £50,270||2% + £3.05 per week||More than £50,270||3.25% + £3.15 per week|
|Class 3 contributions:||£15.40 per week||Class 3 £15.85 per week|
Similarly to the National Insurance rate rises, those who earn money from dividends will also see a 1.25 percentage point rise from April.
You may have to pay dividend tax if you're an investor that earns money from owning company shares; you're only charged tax on the amount you earn above the dividend allowance, which is £2,000 in 2022-23, unchanged from 2021-22.
The rate you pay depends on your income tax band, as shown in the table below:
|Income tax band||Dividend tax rate 2021-22||Dividend tax rate 2022-23|
Scottish parliament announced its draft Budget in December 2021, which contained proposals to raise some of its income tax thresholds from April 2022.
Income tax is devolved in Scotland, which is why there are different rates and thresholds to the other UK nations. The table below shows how much tax you are likely to pay in 2022-23 if you're a Scottish taxpayer.
|Tax band||Income||Tax rate||Income||Tax rate|
|Personal allowance||Up to £12,570||0%||Up to £12,570||0%|
|Top rate||More than £150,000||46%||More than £150,000||46%|
These proposals will need to be approved by the Scottish Parliament and receive royal assent before they are brought into force.
Previously, there had been a window of just 30 days for taxpayers to report the gain and pay the tax owed - as of the Budget on 27 October 2021 - this was immediately increased to 60 days.
In practice, this means anyone who makes a capital gain after selling a second home or buy-to-let property will need to submit a residential property return to HMRC, and make a payment on account for the estimated tax owed within 60 days of the gain being made.
This is only for properties sold on or after 27 October 2021.
If you sold property between 6 April 2020 to 26 October 2021, you would have been required to report and pay the CGT within 30 days.
This is another rule change that has already come into force - but only at the start of this year.
For anyone who dies on or after 1 January 2022, there are new rules about whether or not their estate can be classed as an 'excepted estate'.
Estates classed as being 'excepted' may not require heirs to report the estate's value - as long as there's no inheritance tax to pay, or any other reasons that mean the estate should be reported.
To count as an excepted estate on or after 1 January 2022, it must:
The online tool covers lots of different income sources, including capital gains, income from pensions, property, self-employment and income from abroad.