Now that the 2023/24 tax year is underway, it’s worth reminding ourselves of tax changes now in effect.
Several new measures have been announced over the past year, some as recent as March’s Spring Budget. These changes will potentially affect your bills, so here’s what you need to know about the tax changes for 2023/24.
Business taxes
Corporation tax
One of the major tax changes for this year is the main rate increase of corporation tax. While this won’t affect companies of all sizes, ones with annual profits from £50,001 to £250,000 and upwards will pay 25%. Companies between these two thresholds will pay 25% but with a tapered marginal relief.
Anyone with profits up to and including £50,000 will continue to pay the original 19%, dubbed the ‘small profits rate’.
R&D
After plans to cut the SME credit rate from 14.5% to 10%, the Chancellor announced that loss-making research and development (R&D)-intensive SMEs (which spend 40% of their time on R&D) can still claim 14.5% in tax credits.
The policy tweak means that R&D-intensive companies can claim back £27 for every £100 they spend on innovation.
Consultations for merging the RDEC and SME schemes are still underway. Currently, there’s no date set for the announcement of the outcome.
Personal taxes
Income tax & dividends
Perhaps the most significant change to personal taxes is the lowering of the additional rate income tax threshold.
Expected to remain in place until 2028, taxpayers will start paying 45% once they earn over £125,140 a year, rather than the original £150,000.
Over this tax year, the Government estimates that a further £420 million will be collected, with an additional 232,000 people finding themselves in the higher bracket.
The tax-free rate for dividends has also been lowered from £2,000 to £1,000. The rates of tax on dividends from April 2023 are as follows:
- basic rate dividends: 8.75%
- higher rate dividends: 33.75%
- additional rate dividends: 39.35%.
Capital gains tax
The tax-free dividend allowance wasn’t the only one to be halved for this tax year, with the £12,300 annual allowance for capital gains also dropping by over 50% to £6,000.
This will again drop for the following tax year, reducing from £6,000 to £3,000 as of 6 April 2024.
Pension taxes
Chancellor Jeremy Hunt’s abolition of the lifetime pension allowance (LTA) was a surprising measure from this year’s Spring Budget.
Having been called on shortly before the Budget to increase the £1,073,000 cap, Hunt decided to eliminate the limit altogether, meaning workers can save as much as they want over their lifetime without being taxed.
Hunt also raised the annual contribution allowance from £40,000 to £60,000. The Government hopes that these measures will encourage workers to stay in employment for as long as possible.
Stay ahead of your liabilities
With the numerous changes to tax thresholds and contributions, it’s essential to stay on top of your payments and obligations to HMRC. We’ve been preparing for the tax year, and what it brings, so we’re perfectly placed to catch you up to speed.
Get in touch to discuss your taxes.