What’s changing for small business clients in the 2022/23 tax year?

With the start of the 2022/23 tax year fast approaching, here’s a rundown of the tax rates, rules and thresholds that affect small business clients and will change in the coming days. 

Changes coming into effect on 1st April

• Making Tax Digital (MTD) for VAT rules will apply to all VAT-registered businesses from Friday 1st April. This means that all VAT-registered clients must use MTD-compatible software, like FreeAgent, to store their business records digitally and submit VAT returns to HMRC for all their business’s VAT periods starting on or after Friday 1st April 2022. Find out how FreeAgent can help you navigate HMRC’s rollout of MTD. 
• The reduced rate of VAT for hospitality businesses, which was introduced during the pandemic, will come to an end on 1st April. The VAT rate that these businesses must charge on most of their services will revert to 20%.  

Changes coming into effect on 6th April

• On 6th April, the rate of National Insurance will increase by 1.25%. This increase will remain in place until 5th April 2023, at which point it will be replaced by a separate Health and Social Care Levy.
• The annual threshold that determines when Class 1 employees’ National Insurance and Class 4 self-employed National Insurance are each due will increase from £9,569 to £9,880. In last week’s Spring Statement, the Chancellor announced that in July this threshold will increase again to £12,570.
• Other changes announced in the Spring Statement that will come into effect on 6th April are Class 2 National Insurance rules changing and the Employment Allowance increasing to £5,000 for qualifying employers.

All of these tax changes will be implemented in FreeAgent in time for the specified deadlines.