April 2022 – changes to business regulations you may need to know

With the end of the financial year rapidly approaching we’ve put together some details on the changes that will be happening, and things that people need to do now to prepare for the updated regulations.

15 March 2022 - Catherine Britton

As we move towards the financial year end, several of the measures that were introduced as urgent responses to Covid-19 are being withdrawn. Additionally, a number of the financial procedures introduced in the last Budget will take effect after 31 March.

Here are some of the key changes to look out for:

VAT for the hospitality sector increases from 12.5% to 20%

This temporary relief was introduced as a support measure for hospitality, hotel and holiday businesses severely affected by the coronavirus pandemic and social distancing measures.

From 1 April the VAT rate for most goods and services within the hospitality reverts back to 20% from the temporary reduced rate of 12.5%.

What should I be doing now to prepare?

  • You will be paying an extra 7.5% to HMRC after 1 April, so make sure that you have factored this increase into your business plans
  • You may want to consider adjusting your prices to cover the increase
  • Update your menus, and ensure you make time for these to be edited and printed
  • Check your website is up to date with any new prices
  • Make sure you update your EPOS, sales systems and accounting software on 31 March

 

Plastic Packaging Tax is introduced

Starting on 1 April, all businesses trading in the UK that use more than 10 tonnes of plastic packaging a year may need to register for and pay the Plastic Packaging Tax (PPT) at £200 per ton. The tax will be due on finished plastic packaging components manufactured in, or imported into the UK, in which less than 30% of the plastic is recycled. This includes imports of packaging which already contain goods or products, such as plastic bottles filled with drinks.

Although the new tax is aimed at producers and importers of plastic packaging which does not contain sufficient recycled content, the additional costs are expected to be shouldered across the supply chain, and so users of plastic packaging should also understand the implications of PPT for them. More information is available in our longer article.

What should I be doing now to prepare?

  • Even if you don’t have to register for the tax, you still need to keep records of your plastic packaging so that you can prove to HMRC that you have no obligation to register. Your records should show:
    • the total amount in weight, and a breakdown by weight of the materials used to manufacture plastic packaging, excluding packaging which is used to transport imported goods
    • data and calculations used to determine if a packaging component is, for the most part plastic, and how much recycled plastic it contains
    • the weight of exempted plastic packaging and the reason for the exemption
    • the amount in weight of plastic packaging exported, and therefore the allowed relief from the tax
  • For imported plastic packaging, details of its recycled plastic content must be obtained from the overseas manufacturer by the liable business in the UK.

 

Minimum wage rates increase

National Minimum Wage, National Living Wage and Apprentice Rate all go up from 1 April 2022. New hourly wage are as follows:

  • National Living Wage rises to £9.50 / hour (6.6% increase)
  • 21–22-year-old rate rises to £9.18 / hour (9.8% increase)
  • 18–20-year-old rate rises to £6.83 / hour (4.1% increase)
  • 16–17-year-old rate rises to £4.81 / hour (4.1% increase)
  • Apprentice rate rises to £4.81 / hour (11.9% increase)

What should I be doing now to prepare?

  • Make sure you have factored in pay rises to your budgets and forecasts
  • Consider if you need to make any changes to make sure that you can afford these increases, such as putting your prices up
  • Check whether any employment contracts or employee handbooks need to be updated
  • Update your payroll software (or inform your payroll providers).

 

Making Tax Digital for VAT is obligatory

Making Tax Digital for VAT will apply to all VAT registered business trading below the £85k VAT registration threshold for VAT return periods starting on or after 1 April 2022. These businesses must now 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. More details are available in our longer article here.

What should I be doing now to prepare?

  • Get in touch with an independent tax adviser who can help you understand more about how the process will work
  • Go to gov.uk and select Making Tax Digital-compatible software
  • Sign up and then maintain digital VAT records from 1 April 2022 or the beginning of your VAT period
  • Ensure that all VAT returns are submitted though the Making Tax Digital software
  • Advisers (such as Scrutton Bland) can sign up on your behalf, however you as a business owner will remain responsible for meeting your VAT obligations.

National Insurance contributions increase

As has been widely publicised, National Insurance will rise by 1.25 percentage points from 6 April 2022, to pay for the NHS and social care. In practice this means that employees earning over £9568 per annum will see their National Insurance contributions go up from 12% to 13.25 %, and employers will have to pay 15.05%, from their previous rate of 13.8%.

What should I be doing now to prepare?

  • Although widely publicised, we’d still encourage you to notify your employees about the increase. You may also want to think about adding a message to their payslips,  HMRC has suggested including the following message on payslips: ‘1.25% uplift in NICs, funds NHS, health & social care’
  • Make sure that you have budgeted in this increase in NI for cashflow purposes
  • Remember to increase the amount you put aside for your National Insurance and taxes. You may consider opening a separate deposit account for tax savings if you haven’t already
  • Make sure your payroll software is up to date

 

Statutory Sick Pay (SSP) reverts to pre-Covid rules

If your employees are absent after 17 March 2022 you (the employer) will no longer be able to claim back Statutory Sick Pay (SSP) of £95.35 a week, and from 25 March the normal SSP rules will apply. This means that any COVID-related absences will have to be funded entirely by you as their employer, and you’ll be required to pay SSP from the fourth qualifying day your employee is off sick – regardless of the reason for their absence. More information is available in our longer article which can be viewed here.

What should I do now to prepare?

  • Update your payroll software (or inform your payroll providers)
  • Ensure you claim before 25 March for any employees absent before 17 March
  • Communicate the change to the HR team who monitor absences

 

Tax increase on dividend income

People who receive income through dividends will pay 1.25% more tax from 6 April. The dividend allowance, which means that the first £2,000 of dividends earned each tax year are not taxable, remains unchanged. Dividends on assets held in ISAs are excluded from the dividend tax. The rates vary according to the level of tax you usually pay:

  • the current basic rate will rise from 7.5% to 8.75%
  • the higher rate increases from 32.5% to 33.75%
  • the additional rate (if you earn £150,000 or more) rises from 38.1% to 39.35%

What should I be doing now to prepare?

  • If you haven’t done so already, we’d recommend you talking to our accountancy and tax advisory teams about how we can help. We may suggest that you consider taking more dividends before 5 April 2022, to ensure you make the most of the lower dividend rates.

Please get in touch if you need more information on any of these points.

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