Business Tax planning for 2022

1) The new Health and Social Care Levy has been brought in, seeing an additional 1.25% applying to employee, employer and self-employed National Insurance Contributions (NICs), as well as the rate of tax paid on dividends. Businesses and owner managers should consider whether they could bring forward any payments such that they are taxed at this year’s tax rates.

2) The increase in NICs will make salary sacrifice arrangements even more beneficial – an extra 2.5% of NIC can be saved. If your business does not operate a pension salary sacrifice scheme, now is really the time to get one in place. Similar schemes can be implemented for cycle to work and electric cars, amongst others.

3) We are nearly half-way through the two-year Super Deduction Scheme, which applies to capital expenditure incurred by companies. The scheme provides an effective rate of tax relief on plant and machinery of around 25% of the amount spent. In part this was to encourage companies to invest, rather than wait until April 2023 when the rate of Corporation Tax is scheduled to increase to 25%. The real value of the scheme, though, is that it is unlimited. From next April, capital expenditure may obtain tax relief of 25% too, but the amount will be capped based on the annual threshold set by the government under the Annual Investment Allowance regime. Companies with smaller profits might not have to pay Corporation Tax at 25% regardless, so they could miss out even more by delaying their spending.

4) There are plenty of other tax planning areas that businesses should be talking to their advisers about. Any businesses which are innovating should be considering Research and Development tax relief. This relief only applies to companies, but partnerships or sole traders could qualify if they incorporate their business, so a change to structure might be valuable.

5) Very few corporates consider the benefits of the Patent Box regime. The rate of Corporation Tax is only 10%. Directors and owners should be looking closely at whether their company can file a patent; it could make the company’s tax bill 60% less from 2023.

Stephen Martin works in the Tax Team at Old Mill. Speak to Steve to discuss your Business Tax at stephen.martin@om.uk or 01225 612176.