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Tax Planning for Individuals 2022

9th March 2022

Our personal tax planning guide is an aide memoire to help you ensure you have used all available reliefs and allowances for the tax year and have identified possible opportunities to minimise your tax bill.

Key issues to watch out for include:

  • Have you made use of your personal allowances?
  • Have you used your annual capital gains tax and inheritance tax allowances?
  • Have you Maximised your pension contributions?
  • Have you used your annual ISA account allowance?

Many of the suggestions in this guide can be reviewed throughout the tax year, but as a tax year ends and a new one beckons there is a particular opportunity to review your tax affairs to make sure you have minimised your tax bill.

Our guide provides a selection of ideas and suggestions to reduce your exposure to tax by taking advantage of available reliefs and allowances, some of which are lost once the tax year ends.

Download our full advisory guide here

Dividends rates increasing: should I act now?

A key issue this year, as mentioned in the guide, is that from 6 April 2022 dividend tax rates will increase by 1.25% as part of the Health & Social Care Levy (NIC rates will increase by the same amount).

All taxpayers will still receive the first £2,000 of dividends free of tax

For tax year 2022/23, dividend tax rates remain lower than their related income tax rates but will increase as follows:

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

The 1.25% extra will also apply to overdrawn directors' loans from 6 April 2022 from the current rate of 32.5% to 33.75%.

Some investors will be unaffected. 

Shares held in ISAs are not subject to dividend tax and, due to the £2,000 tax-free dividend allowance and the personal allowance, around 60% of individuals with dividend income outside of ISAs are not expected to pay any dividend tax or be affected by this change in 2022-23.

Planning points

Subject to commercial and other considerations, director shareholders may wish to consider taking a dividend before 6 April 2022 to avoid the tax increase.

But bear in mind:

  • The amount of dividends already received in the current tax year.
  • Your salary/dividend mix.
  • Any co-ownership of shares in your company with your spouse.
  • Profit expectations.

Please contact your usual Bishop Fleming advisor to discuss your particular circumstances to see if your company should pay a dividend before 6 April 2022.

If you would like to discuss your tax affairs, please contact a member of our personal tax team.

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