With the new April 2023-24 tax year upon us, we want to take a moment to look at what changes are coming and how these could impact your business.
Business owners are encountering many challenges, with rising energy costs hitting hard, supply chain complications and high inflation. As we approach the new financial year, we look at how you can minimise the impact on your bottom line.
Income tax
In England, Wales and Northern Ireland, the additional 45% tax rate threshold is reduced from £150,000 to £125,140.
All other income tax thresholds remain frozen at their current rates until April 2028.
In Scotland, the higher rate threshold has been reduced to £125,140, with the rate increasing to 42% and the top rate now 47%.
Business tax
The super-deduction scheme ends on 31 March 2023.
Two capital allowance schemes are coming into place, the full expensing scheme and the 50% first-year allowance to special rate assets extension to 31 March 2026.
Full expensing
In the year of expenditure, Businesses can claim 100% capital allowance on qualifying plant and machinery investment (Broadly new and unused ‘main pool’ expenditure) reducing tax by 25p for every pound invested.
You can access this scheme from April 2023 to March 2026.
Annual investment allowance (AIA)
The September 2022 mini budget announced that the AIA £ 1 million limit is now permanent, allowing businesses to write off the first million of capital expenditure against their tax bill.
Business rates relief
A £13.6 billion support package will provide business rate relief in England over the next five years, including targeted help for small businesses and the high street, plus freezing business rates at 49.9p and 51.2p in 2023/24.
Corporation tax
Initially announced in March 2021, corporation tax (CT) is rising:
- From April 2023, companies with taxable profits above £250,000 will now pay 25% (higher rate)
- Companies with profits below £50,000 will continue to pay the 19% rate
- Companies with profits between £50,000 – £250,000 will pay tax at a reduced main rate, gradually increasing their effective CT rate.
This new rate system can add significant costs and complexities to businesses compared to the original flat rate (19%).
VAT (Value Added Tax)
VAT threshold
For the next three years, the VAT registration threshold is to remain at £85,000.
High inflation rates mean that more businesses now must register for VAT, generating more revenue for HMRC (HM Revenue and Customs).
If your business reaches the VAT threshold, you must meet certain obligations:
- Register for VAT
- Charge customers VAT on sales
- Submit VAT returns through Making Tax Digital (MTD) compliant software.
- Pay the variation between input and output VAT to HMRC
As a VAT-registered business, you can reclaim input VAT. If you seek VAT registration advice or other services, our advisors can help you avoid costly VAT mistakes.
Energy support
The Energy Price Guarantee will remain at £2,500 until July 2023 for the average household.
From April 2023, the Energy Bills Discount Scheme will replace the Energy Bill Relief Scheme and run for twelve months.
Any further energy bill support for businesses will likely be lower and more targeted to those most affected.
Childcare support for working parents
Working parents will see a rollout of new measures for children between 9 months and five years old, who will get up to 30 hours of free childcare from April 2024. The implementation of this scheme should be complete by September 2025, and these changes intend to encourage more parents to return to work after having children, potentially relieving business staff shortages.
This scheme is currently only available for parents of three and four-year-olds.
Both parents must work at least 16 hours a week at minimum wage to qualify, and funding begins when maternity/paternity leave ends.
From September 2026, primary schools will offer additional wraparound care, potentially in partnership with other schools.
Employers can get further HR advice on maternity, paternity and shared parental leave matters. Contact our experts today for your free business HR health check.
Payroll & wages
National Insurance
For employees over 23, the National Living Wage (NLW) is increasing by 9.7% to £10.42 per hour (previously £9.50p/h).
National Minimum Wage rates are also increasing:
- 16 – 17-year-olds and apprentices: from £4.81 to £5.28 an hour (9.7% increase)
- 18 – 20-year-olds: from £6.83 to £7.49 an hour (9.7% increase)
- 21 – 22-year-olds: from £9.18 to £10.19 an hour (10.9% increase)
National Insurance contributions (NIC) thresholds and Class 1 rates are frozen until 2028, whilst Class 2 & 3 NICs rates for the self-employed are £3.45 and £17.45.
The Chancellor has frozen employers’ NICs secondary thresholds at £9,100 until 2028, increasing employment costs for eligible employers with NICs over £5,000 per annum.
The employment allowance remains at £5,000 for 2023/25, protecting 40% of businesses from paying NICs.
Dividend allowance
Limited company owners who pay themselves using dividends will see their dividends allowance reduced from £2,000 to £1,000 in April 2023 and to £500 in 2024, increasing the tax burdens.
Capital gains tax (CGT)
The CGT annual exempt amount (AEA) is now £6,000, reduced from £12,300. A further reduction will occur in April 2024, when the AEA goes to £3,000.
Vehicle duty is extended to April 2025, adding costs to employers that provide electric vehicle fleets to employees.
Work and pensions
Over 50
For people aged 50 or over, we will see an introduction of returnship apprenticeships to encourage those wanting to work back in the workplace.
The government will provide a £63m funding package but has not yet set a start date.
The Midlife MOT is a free tool for employers and employees to encourage adults to plan their work, money and well-being.
The DWP (Department of Work and Pensions) is increasing the number of people to benefit from the midlife MOT from 8,000 to 40,000 annually.
Pensions
There are new measures from April 2023 to encourage working longer before retiring.
After a 9-year freeze, the annual pension allowance has increased from £40K to £60K, so individuals can now contribute more to their private pension pots without incurring tax.
The pension lifetime allowance of £1.07m is no longer in place, and people can make unlimited contributions to their pensions without incurring tax charges.
Research & Development (R&D)
The R&D regime in the UK will see several changes from 1 April 2023
Businesses will see a new R&D scheme targeting intensive loss makers from 1 April 2023. This scheme is projected to assist 20,000 organisations and is worth £500m annually.
Eligible SMEs (small and medium-sized enterprises) that spend 40% or more of total expenditure on qualifying research and development can receive an enhanced tax credit of 27%.
For every £100 spent on R&D, loss-makers can claim £27 instead of £18.60 from HMRC.
Conversely, the tax credit available to non-research-intensive companies under the SME scheme will decrease to around 19%.
The credit available under the separate research and development expenditure credit scheme will increase from 13% to 20%.
Many companies claiming R&D reliefs for accounting periods beginning on or after 1 April 2023 will need to notify HMRC of their intention to claim within 6 months of the period end so it’s increasingly essential to obtain advice early.
New investment zones
The introduction of a scheme to generate 12 new investment zones aims to drive investment and growth across the UK.
Over five years, each zone is to receive an £80m funding package to improve skills, provide specialist business support and enhance the local infrastructure. There are eight English areas on the shortlist and one zone in Scotland, Wales and Northern Ireland, and centre around a major research institution such as a top university.
Stamp duty
Stamp duty land tax rates see no changes this year, with the cuts introduced in September 2022 remaining in place until 31 March 2025.
With every new tax year, you must reflect on what these changes could mean for you and your business.
The changes could affect you in numerous ways, including as an employer or your employees.
As a multi-faceted business advisory chartered accountancy practice, our professionals are on hand to navigate these changes and guide business owners of all shapes and sizes. If you would like to arrange a free consultation with one of our advisors to discuss the April 2023-24 tax year, please contact us.
He has a portfolio of clients including non-UK resident company landlords, high net worth individuals, entrepreneurs, self-employed and owner-managed businesses. His support has helped individuals, owner-managed businesses, and large corporate groups utilise tax reliefs to run their businesses efficiently and meet their compliance obligations.
