The new fiscal year is already underway, and a slew of tax changes are now in effect.
Although some were announced a while ago now, it’s understandable that you may have missed a few – especially with all the rapid-fire Government changes. No matter, we wouldn’t let you fall by the wayside.
Our article will bring you up to speed with all of the changes, from income tax to capital gains (and everything in between).
Firstly, the income tax personal allowance of £12,570 will remain unchanged, as will the higher rate.
The first major difference is the lowering of the 45% additional tax band threshold from £150,000 to £125,140. The Government expects this change to remain in place until 2027/28.
The Government says this measure will impact around “792,000 taxpayers, of whom around 232,000 will pay the additional rate of tax, who would not have done so had this threshold been maintained at £150,000”.
Lowering this threshold will represent a £621 cash loss for those with an income between £125,140 and £150,000. Anyone earning over £150,000 will expect to lose £1,256 to tax.
Anyone who collects dividends as part of their pay packet must now pay more tax to HMRC.
From this April, the tax-free dividend allowance has dropped from £2,000 to £1,000. The rates of tax on dividends from April 2023 are as follows:
- basic rate dividends: 8.75%
- higher rate dividends: 33.75%
- additional rate dividends: 39.35%.
Capital gains tax
It’s not just the additional rate threshold that the Government has cut for this tax year but the capital gains (CGT) one too.
This April, the annual allowance for CGT has been slashed dramatically from £12,300 a year to £6,000. This won’t last forever, though, as the threshold will be cut again in the 2024/25 tax year to £3,000.
One bit of welcome news from the Spring Budget in March 2023 was Jeremy Hunt’s abolition of the pension lifetime allowance (LTA).
Previously frozen for years at the cap of £1,073,000, lifting the threshold now allows professionals to save an untapered amount over their lifetime. As well as lifetime contributions becoming tax-free, the annual allowance has risen from £40,000 to £60,000.
These reforms aim to keep people in the workforce for longer – especially medical professionals who would leave due to the restrictions on their pension schemes.
It’s not just personal taxes affected by the coming of the 2023/24 fiscal year, but corporation tax as well.
The rise in corporation tax has been long on the cards, and now companies with an annual profit of £250,000 and more will be subject to a 25% rate. For companies taking between £50,000 and £250,000, the 25% rate (or main rate as it’s now known) will apply but with marginal relief.
During his Spring Budget speech, Hunt said that only 10% of companies in the UK would actually end up paying the full main rate.
Companies with a turnover of under £50,000 will still only have to pay the original 19%, now known as the small profits rate.
Get a handle on your taxes
The various threshold rises and cuts can be overwhelming to deal with alone, especially if you’re affected by more than one.
It’s our job to make sure you’re up to speed on the latest HMRC compliance and meeting your liabilities. So, if you’re feeling a bit stuck, get in touch.