That’s the warning from Francesca Hutcheson, tax director at Dyke Yaxley Chartered Accountants in Shrewsbury and Telford, who said the new tax year was set against a backdrop of rising costs and rising taxes.
“Late last year, as we seemed to be coming out of the worst of the Covid pandemic, the Chancellor Rishi Sunak announced a new Health and Social Care Levy to increase funds for the National Health Service.
“In the first year of operation, the levy will be collected via a temporary increase in National Insurance contributions of 1.25 per cent – but from April 2023, it will operate as a stand-alone tax.”
Francesca said there had been widespread speculation that the Chancellor would heed calls to defer or even abolish the new levy in his Spring Statement in March.
“The statement being delivered against a backdrop of rising fuel and living costs, and the uncertainty surrounding the situation in Ukraine, but despite the concerns of a wide range of sectors and organisations, the introduction is going ahead as planned.
“The new tax came into force this month and it will affect employers, employees and the self-employed.”
Francesca said employers should be budgeting for the increase in their staff costs and the increased administrative burden of updating their payroll systems.
“Employees will also see their take-home pay reduced, and salary sacrifice arrangements, such as for employee pension contributions, will become even more tax efficient.
“Owner-managers who take dividends from their businesses will also be caught by the new rules, with the rates of dividend tax also increasing by 1.25 per cent.
“In April 2023, the main rate of Corporation Tax will also increase to 25 per cent, which will push the tax rate on profits extracted from an owner-managed business above 50 per cent.
“As we go into the new tax year, businesses will need to give careful thought to their employee reward and remuneration strategies to ensure that these are structured as tax efficiently as possible.
“In an environment of rising costs and rising taxes, businesses have an opportunity to look closely at the way they operate in order maximise the opportunities available to ensure they are running as smoothly and effectively as they can.”