With the start of a new tax year just around the corner, it is crucial to be aware of a number of tax changes that are being introduced from April 2023, writes Gary Bugdale, Managing Director of TaxAssist Accountants Farringdon.
We have put together a handy summary of the main changes so you can prepare your business and personal finances for the months ahead.
Corporation tax rate rise
The single largest tax change from April facing UK businesses is the increase in corporation tax. The main rate is set to rise to 25 percent, where profits are more than £250,000.
A new 19 percent ‘small profits rate’ of corporation tax will apply where profits are below £50,000.
Companies whose profits range between £50,000 and £250,000 will be eligible for marginal relief.
Profits falling between the upper and lower limits (in the margin), will pay an effective tax rate of 26.5 percent.
The upper and lower tax limits are reduced in proportion to the number of companies which are associated for tax purposes.
Companies will be associated where one has control of the other, or where both are under common control.
Income tax rise for higher earners
The income tax additional rate threshold (ART) is set to reduce from £150,000 to £125,140 from 6 April 2023.
More taxpayers will therefore pay income tax at 45 per cent, once their income exceeds £125,140.
Scottish taxpayers also face changes to their top rate of income tax.
Reduced capital gains tax annual exempt amount
The capital gains tax annual exemption most individuals can claim is set to change from £12,300 to £6,000, and lowered further to £3,000 from April 2024.
Dividend allowance reduction
The dividend allowance is set to be cut from £2,000 to £1,000, and to £500 from April 2024.
The tax rates applied to dividends above the dividend allowance depends on your income tax band. The following rates apply from April 2023:
Basic rate taxpayer: 8.75 percent
Higher rate taxpayer: 33.75 percent
Additional rate taxpayer: 39.35 percent
Frozen National Insurance contribution rates
The government has frozen the following National Insurance rates until April 2028:
Class 1 primary threshold for employees: £12,570
Class 1 secondary threshold for employers: £9,100
Class 2 Lower Profits Threshold for the self-employed: £12,570
When undertaking a tax review, it is advisable to seek professional advice.
TaxAssist Accountants Farringdon
66 Long Lane, Barbican EC1A 9RQ
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020 3941 2011