A new tax year inevitably brings with it a number of changes to tax rules and regulations which could have an impact on your business as well as your personal finances.
It can be a bit confusing keeping up to date with everything that’s going on, especially when you’re busy running a business, so here is a handy list of some of the key changes you should know about.
Increase to the National Living Wage and National Minimum Wage rates
The cost of living crisis and rising inflation has made pay a key issue, so the government has accepted in full the recommendations made by the Low Pay Commission. This means anyone working on a minimum wage will get a pay increase from April 2023.
| Current rate from April 2023 | Previous rate | Increase | |
| National Living Wage | £10.42 | £9.50 | 9.7% |
| 21-22 Year Old Rate | £10.18 | £9.18 | 10.9% |
| 18-20 Year Old Rate | £7.49 | £6.83 | 9.7% |
| 16-17 Year Old Rate | £5.28 | £4.81 | 9.7% |
| Apprentice Rate | £5.28 | £4.81 | 9.7% |
| Accommodation Offset | £9.10 | £8.70 | 4.6% |
Changes to National Insurance contributions
There have been a number of controversial changes to National Insurance over the last couple of years, so it comes as a bit of a relief that the National Insurance Class 1 rates and thresholds remain unchanged for this tax year.
However, Class 2 and Class 3 rates for the self-employed have been increased by 30p per week and £1.60 per week respectively.
Income tax
By and large Income Tax rates haven’t changed, although the additional rate has been lowered from £150,000 to £125,140.
Income Tax bands and thresholds in England & Wales and Northern Ireland
| Income Tax band | 2023/24 thresholds | 2022/23 thresholds |
| 0% (Personal Allowance) | Up to £12,570 | Up to £12,570 |
| 20% (Basic rate) | £12,571 to £50,270 | £12,571 to £50,270 |
| 40% (Higher rate) | £50,271 to £125,140 | £50,271 to £150,000 |
| 45% (Additional rate) | Over £125,140 | Over £150,000 |
Dividend allowances slashed in half
If you’re a limited company owner and pay yourself using dividends the news isn’t good. From April 2023, the dividend allowance has been reduced from £2,000 to £1,000 and from April 2024 it will be reduced to £500. However, the rates of dividend tax will remain the same: 8.75% basic rate, 33.75% higher rate, and 39.35% additional rate.
No more flat rate Corporation Tax
While the rate remains at 19% for companies with profits below £50,000, from April 2023 the rate for companies with taxable profits above £250,000 will increase to 25%.
And just to complicate things further, companies with profits between £50,000 and £250,000 will pay a tax rate of 25% but this is tapered down using a marginal relief calculation. If you didn’t need an accountant before, now could be the ideal time to get one!
Capital Gains Tax allowance reduced
Capital Gains Tax is paid on any profits you make from selling an asset, such as a second property. This has been cut from £12,300 in 2022/23 to £6,000 from this April. It will face a further reduction to just £3,000 in April 2024.
State Pension changes
It’s good news for the State Pension as not only was it increased by 10.1% in April but also the annual allowance for adding to your pension tax-free has gone up from £40,000 to £60,000 for this tax year.
And a few things you don’t need to worry about for a while
VAT
The VAT threshold will remain at £85,000 until 31 March 2026
Company car tax rates
These haven’t changed this year, but businesses should expect the rates to go up by 1% in 2025/2026 across all bands.
Inheritance tax
The threshold for Inheritance Tax of £325,000 has been frozen until April 2028. The additional residence nil-rate band, where your main residence can pass to direct descendants, is also frozen at £175,000.
We’re here to help
If you’re unsure about how any of these changes affect you or your business, do get in touch. We are more than happy to talk you through any of the changes and make sure you are running your business in the most tax-efficient way possible.
