A fairly light touch budget was presented by the Chancellor on March 15th, there were some points to note, combined with the flurry of announcements in late 2022 we thought it best to recap coming changes for the 2023/24 tax year.
Tax rises across all areas kick in from April…
Personal tax rates
The personal allowance will remain unchanged. This means the rate at which tax and national insurance is paid is still £12,570.
The higher rate threshold also remains unchanged at £50,270. Any earnings over this are taxed at 40%.
The rate at which the 45% rate of tax starts has been reduced to £125,140 from £150,000.
The freezing of these thresholds is in effect a tax rise in all but name with wages currently rising at the fastest rate for 30 years.
Dividend tax rates
The rate at which dividends are taxed will increase from 7.5% to 8.75%. This is on earnings up to £50,270.
Dividend income on earnings over £50,270 will be taxed at 33.75%, increased from 32.5%.
The tax free banding for dividends has been reduced from £2,000 to £1,000 for 2023/24 with a further cut to £500 for 2024/25 planned.
The tax free threshold (the amount of a gain that is tax free) has been cut from £12,000 to £6,000 in 2023/24, with a further cut to £3,000 in 2024/25.
Employer’s national insurance allowance remains at £5,000 for 2023/24. This means the first £5,000 of employers national insurance a qualifying business is due to pay is removed.
The biggest movement is in corporation tax. The headline rate is moving from 19% to 25% on company profits. However there are subtle differences in the rates depending on the level of profits.
- If a company makes a profit of less than £50,000 the rate will remain at 19%.
- If a company makes profits of between £50,000 and £250,000 it will pay a corporation tax rate of between 19% and 25% with the rate increasing as profits increase.
- If a company makes profits of over £250,000 all profits are taxed at 25%.
Other announcements to note
Pensions – annual contributions have been increased to £60,000 from £40,000.
Stamp duty remains at 0% for property purchased up to £250,000.
The chancellor did announce something he called “full expensing” when purchasing assets. This is aimed at businesses purchasing over £1m in new assets. Any business purchasing qualifying plant and machinery with a value of less than £1m will still be able to claim the cost against their corporate tax bill in year one, as in previous years.
Inheritance tax rates remain unchanged at £300,000.
Tax is rising across the spectrum as the government looks to balance the books after Covid. These rise will feed into tax liabilities over the next 18 months. We will be working with clients to mitigate tax liabilities as far as possible over this period.