2023 does seem to be flying by and from 6th April we moved from one tax year into another. But what’s changing in this tax year? What do you need to know for your business and financial planning?
We’ve created a roundup of some of the most important changes you need to know about for the 2023/24 tax year meaning you can get your plans in place and relax knowing there won’t be any nasty surprises waiting for you at the end of next year.
There are significant changes to Corporation Tax from 6th April 2023. From 6th April 2023, there will be two corporation tax rates.
- For profits below £50,000 this will remain at 19%.
- For profits above £250,0000 the rate will be 25%.
- For profits over £50,000 but below £250,000 there will be marginal relief on the main rate of tax of 25%.
As this applies from 6th April 2023, if you have a tax period that straddles this date, then you will have your profits time apportioned to both periods, and will pay tax on those profits in the relevant period on the corresponding rate.
For example, you have a year-end of 31st May 2023, 10 months of your year are before the change, and 10 months of profits are attributed to that period. The remainder will have the new rates applied.
The new rules for Corporation Tax relating to associated companies will apply from 6th April 2023.
A company is classed as being associated if, at any time in the accounting period, a) one company has control of another company, or b) both companies are under the control of the same person or group of persons.
For example, an individual directly holds 100% of the shares in 4 separate trading companies – this will see that all four companies are treated as associated from April 2023. Each company will therefore be subject to tax at 25% when its profits exceed £62,500 (which is £250,000 divided 4).
There are some exclusions from this including:
- Dormant companies
- Passive holding companies (essentially no activities other than receiving or distributing dividends)
- Companies owned by associates of the person (or person), providing the relationship between those companies is not one of “substantial commercial interdependence”
Where a company has multiple owners, and those owners have shares in their own companies, an associated company’s test would need to be completed to determine which companies fall under “Associated Companies” rules, as there would be questions about minimum controlling combinations and it can get complicated. If you feel that this may affect you, please get in touch with us as soon as possible so we can assess the situation and ensure there is a plan in place.
The tax-free dividend allowance is being reduced to £1000 from 6th April 2023, with a further reduction to £500 coming into effect from 6th April 2024.
The dividend tax rate was increased in April 2022 to account for the Health and Social Care Levy. Whilst this has been scrapped, the increase has not been reduced on dividends.
The current rates for Dividends are 8.75%, 33.75% and 39.35%. They are not being reduced.
Capital Gains Allowance
The Capital Gain allowance is being reduced from £12,300 to £6,000 from 6th April 2023, and will drop to £3,000 from 6th April 2024. This means that if you sell an asset that could be liable to Capital Gains tax (rental property, shares etc) then you will have less of a tax-free allowance and you will pay tax sooner on the sale of that asset.
Minimum Wage is increasing from 6th April to the rates outlined below. The 6th April is a hard date and does not depend on when your tax year starts.
16–17-year-olds from £4.81 to £5.28 per hour
18–20-year-olds from £6.83 to £7.49 per hour
21–22-year-olds from £9.18 to £10.18 per hour
23 years old and over from £9.50 to £10.42 per hour
Other PAYE rates movements
Statutory Family related pay such as SMP, SPP, SAP with increase from 2nd April from £156.66 to £172.48 per week. As an employer statutory family related pay can be reclaimed from HMRC.
From the 6th April Statutory Sick pay will increase from £99.35 to £109.40 per week. SSP cannot be reclaimed from the government and is a cost for employers.
There is also an extra bank holiday in 2023 on 8th May 2023 for the King’s coronation.
Tax thresholds for basic and high rate will remain the same across England, Scotland, Wales and Northern Ireland. However, the additional tax rate will now apply from £125,140 rather than the previous £150,000.
All NI thresholds and rates are remaining the same. There are no other changes with Scottish or Welsh rates of taxes.
The VAT registration threshold remains at £85,000 turnover for sales on a rolling 12-month basis.
The penalty system for VAT has changed from 1st January 2023 with late submission penalties moving towards a point-based system. For each return you submit late, you will receive a penalty point until you reach the penalty point threshold.
When you reach the threshold, you will receive a £200 penalty. You will also receive a further £200 penalty for each subsequent late submission while you are at the threshold.
The penalty point thresholds are:
Accounting Period Penalty Points Threshold
Annually 2 points
Quarterly 4 points
Monthly 5 points
Here’s an example of how the new penalties would work for a business making quarterly returns:
- A company submits their VAT returns quarterly. This means their penalty point threshold is 4.
- They already have 3 penalty points because they submitted 3 previous returns late.
- They submit their next returns late and get a 4th penalty point. Because they have reached the penalty point threshold, they receive a £200 penalty.
- The company submits their next return on time. They stay at the threshold of 4 penalty points but do not get a £200 penalty.
- The company submits their next return late. As they are still at the penalty point threshold of 4 points, they receive another £200 penalty.
It is possible to remove penalty points. To find out more about this please read the HMRC guidance – https://www.gov.uk/guidance/remove-penalty-points-youve-received-after-submitting-your-vat-return-late
With so many changes happening this tax year, it’s important to have a tax plan in place so you don’t get caught out or fall fowl of any of the new penalties. If you would like to talk about your current or future tax position we’d be happy to have an informal chat with you to help clarify the changes and how they may affect your business.