You’ll no doubt have heard the phrase ‘no day is the same’ when someone’s talking about their job.
Well, working in accountancy that couldn’t be truer.
Just when you’ve mastered all the relevant taxes for the current tax year you get a soft prod on the shoulder, and when you turn around there’s next tax year smiling and waving at you with a raft of changes.
Luckily for us, we relish the challenge and every year we digest every change for you before turning them in to comprehensive tax advice to make sure both your personal, and business, finances are optimised.
The 2023/24 tax year is no different and comes with interesting and wide-reaching changes for us to get our teeth into. We’ve summarised the key changes here.
What’s changing when it comes to Income Tax and Capital Gains Tax?
The UK income tax bands have gone into the first year of a four-year tax rate band freeze (until April 2028), however the Additional Rate Tax Band (45%) will be decreasing to £125,140:
| Tax | 2022-23 Tax Rate | New Rate in the 2023-24 Tax Year |
| Personal Tax Allowance | £12,570 | £12,570 |
| Basic Rate Income Tax (20%) | £12,571 – £50,270 | £12,571 – £50,270 |
| Higher Rate Income Tax (40%) | £50,271 – £150,000 | £50,271 – £125,140 |
| Additional Rate Income Tax Band (45%) | £150,000 upwards | £125,140 upwards |
| National Insurance Threshold | £12,570 | £12,570 |
There has also been a decrease in the Capital Gains and Dividend tax free allowances.
The threshold above which you pay tax on Capital Gains has decreased from £12,300 to £6,000 and for Dividends this has decreased from £2,000 to £1,000.
National Insurance and National Minimum Wage
The National Insurance contributions (NIC) thresholds and Class 1 rates follow the Income Tax thresholds and have been frozen until 2028. Class 2 and 3 NIC rates for the self-employed have been uprated to £3.45 and £17.45 from April 2023.
Some positive news comes in the form of changes to the National Living Wage with this increasing from £9.50 to £10.42 for individuals of 23 years or above.
What’s the change to Corporation Tax this year?
The biggest shift in Corporation Tax in over a decade, that’s what.
The main rate of Corporation Tax will rise from 19% to 25%.
However, smaller companies will not have to pay the full rate. It depends on your level of profits for each company tax year.
The current 19% rate will still apply – if your annual profits are at, or below a new £50,000 threshold.
The full 25% rate applies to companies with annual profits of £250,000 or more.
Between these two rates, a system of marginal relief will apply, which we won’t bore you with the calculations on. We’ll keep that excitement to ourselves for now!
It’s worth also noting that the thresholds will be proportionately reduced for short accounting periods and where there are associated companies.
How are the rates of relief for R&D changing?
HMRC have really turned their attention to R&D rates of relief for the 23/24 year.
The enhanced deduction for SMEs reduces from 130% to 86%, and the amount of tax credit reduces from 14.5% down to 10%.
For R&D intensive SMEs, which are also loss-making, the tax credit will be maintained at 14.5%. To qualify, R&D expenditure must be at least 40% of the total expenditure.
It’s not all bad news though, as businesses claiming under the RDEC scheme see their tax credit rate increase from 13% to 20%.
