What Tax Changes Are Happening in April 2022?
End of Temporary Reduced Rate for Leisure and Hospitality
Back in July 2020, the government announced a temporary reduced rate for the hospitality, hotel and holiday accommodation sectors as well as admission to certain attractions from 20% to 5%, as one of several measures designed to support businesses during the Covid-19 pandemic.
In the spring 2021 Budget, the Chancellor announced a second extension to the relief: the 5% rate of VAT was extended until 30 September 2021. From 1 October 2021 the hospitality sector VAT rate increased to 12.5% until 31 March 2022, after which time it will return to the standard rate of 20%.
As a result, you will need to consider revising your VAT rates in your accounting software. Changing VAT rates back to previous levels can be tricky depending on your accounts software but if you’re a customer then don’t worry, our support team are only a phone call away and are ready to help. If you require assistance please call: 01724 400301 or you can log a support ticket.
Making Tax Digital for VAT Mandatory
VAT-registered businesses with a taxable turnover above the VAT threshold (£85,000) are already required to follow the Making Tax Digital rules by keeping digital records and using software to submit their VAT returns.
VAT-registered businesses with a taxable turnover below £85,000 will be required to follow Making Tax digital rules for their first return starting on or after April 2022. As a result, such businesses will be required to maintain digital records of their VAT data, submit VAT returns to HMRC via appropriate software and ensure that all data is “digitally linked” throughout their VAT return process.
For help choosing the right software to support MTD click here.
Introduction of Plastic Packaging Tax
The tax, which will come into force on 1 April 2022, will be charged at a rate of £200 per tonne and only applies to manufacturers and importers of plastic packaging components which contain less than 30% recycled plastic. You will need to register for the Plastic Packaging Tax if you’ve manufactured or imported 10 or more tonnes of finished plastic packaging components within the last 12 months or will do so in the next 30 days. Click here to see the steps to take when deciding if you should pay the Plastic Packaging Tax and how you can do it.
Health and Social Care Levy
In an effort to combat the impact of the Covid-19 pandemic on the NHS and health and social care systems, it was announced that there will be a 1.25% increase in National Insurance contributions from 6th April 2022 until 5th April 2023.
The tax rise is labelled a Health and Social Care Levy and is meant to raise £12bn a year (£36bn over the next three years).
For directors of their own companies, the levy is 2 x 1.25% = 2.5% due to it being charged on both employers and employees NICs.
With the rise in the National Minimum Wage (NMW) in April, the social care levy could see employers wanting to use more salary sacrifice arrangements to mitigate the rise in employer NICs. But remember, employees must not be allowed to sacrifice their pay to below the NMW. Employers should try to ensure that their payroll systems have measures in place to prevent this from happening.
Find out more about Changes to National Insurance Thresholds and Rates.