Tax year 2023/2024
Welcome to the 2023/2024 tax year. It feels like we are off to a flying start already with clients working hard to get their documents in and file self-assessments nice and early.
There are some changes worth knowing about for this new tax year. We’ve set a few of these out below:
The much used super-deduction scheme for limited companies ended on the 31st March. Instead, we now have two capital allowance schemes. These are a new full expensing scheme and the extension of the 50% first-year allowance.
The full expensing change allows a business to claim 100% capital allowances on qualifying assets in the year that the expenditure is incurred. The effect being a reduction in the business tax bill by up to 25p for every pound. More info can be found here.
The scheme is available from April 2023 until the end of March 2026 and may be made permanent.
The 50% first-year allowance to special rate assets will be in place until 31 March 2026.
The annual investment allowance (available to limited companies only) is set to stay at the first £1m of investment in capital expenditure.
Corporation tax rise
The Corporation tax rate rises are going ahead as planned:
· Companies with taxable profits above £250,000 will pay a higher rate of 25%. This will take effect from April 2023.
· The 19% corporation tax rate remains the same for profits in a company below £50,000.
· If a company has profits between £50,000 and £250,000, tax will be due at a reduced main rate, which gradually increases their effective corporation tax rate.
The new rate changes will add a layer of complication and cost to businesses.
VAT threshold frozen
The VAT registration threshold will remain at £85,000 until 31 March 2026.
This will mean that more businesses must register for VAT, due to high inflation.
Changes to childcare support
Working parents of children between nine months and five years old will get up to 30 hours of free childcare. This will be introduced in stages from April 2024.
The qualifying criteria are:
· All parents in a household must work at least 16 hours per week at minimum wage to qualify, and funding will begin when maternity or paternity leave ends.
· Additionally, from September 2026, all primary schools will offer wraparound care alone or in partnerships with other schools.
Income tax changes and personal allowance freezes
From April 2023 in England, Wales and Northern Ireland:
· The additional 45% tax rate threshold has been lowered from £150,000 to £125,140 for England, Wales and Northern Ireland.
· The other income tax thresholds remain frozen at their current rates until April 2028.
· The higher rate threshold has been reduced to £125,140, with the rate increasing to 42%. The top rate has been increased to 47%.
The lowering of the 45% tax rate threshold will have an impact on client who are already close to the level.
Wages and payroll
National Living Wage and National Minimum Wage has increased.
The top National Living Wage rate has increased to £10.42 per hour. This applies to over 23 year olds and comes into effect from April 2023.
The National Minimum Wage has also gone up, as follows:
· 10.9% increase for 21 to 22-year-olds: from £9.18 to £10.19 an hour
· 9.7% increase for 18 to 20-year-olds: from £6.83 to £7.49 an hour
· 9.7% increase for 16 to 17-year-olds and apprentices: from £4.81 to £5.28 an hour.
National Insurance thresholds and rates
The National Insurance contributions (NIC) thresholds and class 1 rates have been frozen until 2028.
The Class 2 has changed to £3.45 per week and Class 3 NIC, which is the voluntary contribution for missing periods has changed to £17.45.
Employer’s National Insurance contributions (NICs) threshold frozen
Employer’s NIC secondary threshold has been frozen to £9,100 until 2028.
The employment allowance remains at £5,000 for 2023/24
Dividend allowance reduction
The dividend allowance has been reduced from £2,000 to £1,000 from April 2023 and to £500 from April 2024.
Capital gains tax
The annual exempt amount (AEA) for capital gains tax (CGT) has been reduced from £12,300 to £6,000 from April 2023, then to £3,000 from April 2024.
Vehicle excise duty on electric vehicles
The government will extend the vehicle excise duty to electric vehicles from April 2025.
From 6 April 2023:
· The annual pension allowance—the amount you can contribute to your private pension in a year without incurring tax—has been increased from £40k to £60k. It’s been frozen for the past nine years.
· The pension lifetime allowance of £1.07m has been scrapped, meaning people can make unlimited contributions to their pensions without incurring a tax charge.