Personal Tax Allowances & Bands
- The Income Tax personal allowance will be fixed at the current level of £12,570 until April 2026.
- The basic rate tax band of £37,700 will be frozen up to April 2028.
- The point at which individuals pay the additional rate will be lowed from £150,000 to £125,140 from 6th April 2023.
Pensions
- The annual allowance for pensions is increasing from £40,000 to £60,000.
- The pension lifetime allowance charge is being scrapped. However, a limit remains on the maximum an individual can claim as a 25% tax free pension lump sum payment of £268,275.
National Insurance
- National Insurance limit will be fixed at the current levels until April 2028, with the exception of Class 2 and Class 3 NIC rates for 2023/2024 becoming £3.45 per week and £17.45 respectively.
- The hourly National Living Wage and National Minimum Wage will be the following from 1st April 2023:
- £10.42 for 23-year-olds and over
- £10.18 for 21-22-year-olds
- £7.49 for 18-20-year-olds
- £5.28 for 16-17-year-olds
- £5.28 apprentice rate for under 19-year-olds and those over 19-year-olds for their first year of apprenticeship.
Car Benefits
- The rate for company car tax remains frozen until 2024/2025. Future car benefit rates have been announced for 2025/2026 to 2027/2028:
- For 2025/2026, the rates for emissions under 75gm/km increase by 1%
- For 2026/2027, the rates for emissions under 75gm/km increase by a further 1%
- For 2027/2028, the rates for emissions under 75gm/km increase by a further 1%
- For company vans, the taxable van benefit increases to £3,960 per van in 2023/2024 and the taxable van fuel benefit increases to £757 in 2023/2024
Corporation Tax
- From April 2023, Corporation Tax rate increases to 25% for companies with profit over £250,000.
- For companies with profits under of £50,000 or less the taxable rate will remain at 19%.
- For companies with profits between £50,001 and £250,000 will pay tax at the main rate, reduced by a marginal relief, providing a gradual increase in the effective corporation tax rate.
- The super-deduction enhanced allowance of 130% is ending on 31st March 2023 and being replaced by “Full Expensing”. This will allow companies to deduct the cost of qualifying plant and machinery from their profits with no expenditure limit. Qualifying expenditure will include most plant and machinery, as long as it is unused and not secondhand (and will exclude cars).
Tax On Dividends
- The current dividend allowance of £2,000 will be reduced to £1,000 for 2023/2024 and reduced further to £500 for 2024/2025.
- Dividend rates for 2023/2024 will be:
- 8.75% for basic rate taxpayers
- 33.75% for higher rate taxpayers
- 39.35% for additional rate taxpayers
As Corporation Tax due on directors’ overdrawn loan accounts is paid at the dividend upper rate, this will also remain at 33.75%.
Making Tax Digital (MTD)
- MTD for Income Tax Self-Assessment (ITSA) has been delayed further and will now be introduced from April 2026 for businesses (and landlords) earning over £50k.
- Those with income over £30,000 will become mandated from April 2027.
Capital Gains Tax Rates (CGT)
- The Capital Gains Tax Annual Exempt amount will be reduced from £12,300 to £6,000 from 6th April 2023 and to £3,000 from 6th April 2024.
Inheritance Tax (IHT) Nil Rate Bands
- The nil rate band has been frozen at £325,000 since 2009, which will continue up to 5th April 2028. An additional rate band, called the “Residence Nil Rate Band’ is also frozen at the current £175,000 level until 5th April 2028.
Childcare
To help people get back into work:
- Working parents will be able to access 30 hours of free childcare per week, for 38 weeks of the year, from when their child is nine-months old to when they start school. This will be rolled out in stages:
- From April 2024, all working parents of two-year-olds can access 15 hours per week.
- From September 2024, all working parents of children aged nine months up to three years old can access 15 hours per week.
- From September 2025 all working parents of children aged nine months up to three-years old can access 30 hours free childcare per week.
- Where parents need childcare for more than 38 weeks a year, they will be able to spread their free hours entitlement over a higher number of weeks.
Employing Older Workers
- The government have introduced a new apprenticeship called a “Returnship”, created for over-50’s to focus on existing skills programmes and previous experience.
VAT
- The VAT registration and deregistration thresholds will not change for a further of two years from 1st April 2024, staying at £85,000 and £83,000 respectively.
What Do You and Your Business Now Need To Consider?
- With the National Minimum Wage rising on 6th April 2023, will any of your staff members need a pay rise?
- Doing your personal tax planning has never been so important, so now is the time to decide whether it would be better to pay yourself more via PAYE rather than PAYE and dividends combined.
- With changes to dividend tax credits and higher tax bands if your business is making over £50k in profit, would it make more sense to increase your payments to your pension particularly as you can now make £60k a year of contributions tax free?
- Decide whether you would be better off closing your limited company and trading as a sole trader.
- If you haven’t already done so, model your cashflow and forecast your cost base for 2023.
