It’s a new tax year (happy new year!) so we’re doing our annual round up of what the 2023/24 changes mean for you and your business.
April also signals the end of quarter one, so take a moment to reflect on all your hard work so far.
What’s new for the 2023/24 tax year?
Corporation Tax Rise
Companies with taxable profits over £250,000 will pay a new corporation tax rate of 25%. If your business makes taxable profits below £50,000, your corporation tax rate will remain at 19%. If your profits are above £50,000 but they’re below £250,000, there’s a sliding scale to take you from 19% to 25%.
Capital Allowance Changes
The Super Deduction scheme has now ended, but it’s replaced with two capital allowance schemes ready for the 2023/34 tax year. There’s a full expensing scheme and an extension of the 50% first-year allowance scheme.
The full expensing scheme allows businesses to claim 100% of their capital allowances on qualifying investments, see the Government site for an up to date list. This will help reduce taxes by up to 25p for every pound invested.
The SME R&D enhanced deduction has now decreased from 130% to 86%.
The Research and Development Expenditure Credit rate has increased from 13% to £20%.
An enhanced credit of 27% is now available for R&D intensive firms where R&D spend is 40% or more of overall expenses.
National Living Wage and National Minimum Wage
From today, the national living wage has increased by 9.7%, from £9.50 an hour to £10.42 an hour. Alongside the national living wage increasing, the national minimum wage increases too:
- 21-22 year olds will now receive £10.19 an hour, up by 10.9% from £9.18.
- 18-20 year olds will now receive £7.49 an hour, up by 9.7% from £6.83.
- 16-17 year olds and apprentices will now receive £5.28 an hour, up by 9.7% from £4.81.
Capital Gains Tax Changes
The annual exemption allowance has now decreased for capital gains tax. It’s now £6000 for the 2023/24 tax year, and will decrease further to £3000 next year.
Additional Rate Income Tax
Changes to additional rate income tax come are now applicable. From April 2023, if you earn over £125,140 a year, you’ll pay 45% income tax. Historically the 45% additional rate only applied to those earning £150,000 or more a year.
The dividend allowance has now decreased from £2,000 to £1,000. It’ll decrease further to £500 from April 2024.
National Insurance Thresholds class 2 and 3
Class 2 and 3 National insurance rates for the self-employed have increased to £3.45 and £17.45.
What is staying the same for the 2023/24 tax year?
The VAT threshold will remain frozen at £85,000 until March 2026.
Employment allowance will remain at £5,000 for the 2023/24 tax year. This means eligible employers can still reduce their annual NI liability by up to £5,000.
National insurance Rate 1
The National Insurance contributions (NIC) thresholds and class 1 rates remain frozen until 2028.
The only income tax that changes is the additional tax that we’ve already talked about. All other income tax thresholds remain frozen at their current rates until 2028.
Need help navigating the new tax year?
Whatever your business plans are this tax year, we’re here to help! Need more advice or help planning? Get in touch.