The start of a new tax year is a critical time for individuals and businesses to be aware of tax changes that will come into effect from April 2023. Being informed and prepared can help you manage your finances more effectively.
In this post, we summarize the key changes that businesses should be aware of and provide some tips to help you reduce the impact of tax increases.
PERSONAL TAXATION
A quick look at the tax changes coming in April 2023:
Increased income tax for higher earners
Starting on 6th April 2023, the income tax additional rate threshold will decrease from £150,000 to £125,140. Additionally, Scottish higher earners will also face increased taxes from April 2023. Furthermore, the higher and top rates of income tax will both rise by 1p starting in April 2023.
Dividend allowance reduction
The dividend allowance will reduce from £2,000 to £1,000 from April 2023, and to £500 from April 2024.
Frozen tax rates
Many tax allowances will be frozen until 2028, which means taxpayers on modest incomes will also pay more tax as inflation bites.
National Insurance rates frozen until April 2028
After the mid-year changes in 2022, the NIC rates should remain stable from April 2023 onwards.
Reduced Capital Gains Tax annual exempt amount
The Capital Gains Tax (CGT) exemption most individuals can claim will reduce from £12,300 to £6,000 from April 2023.
Frozen Inheritance tax thresholds
The inheritance tax (IHT) nil-rate band of £325,000 will be frozen until April 2028.
Tax tips
Consider tax-efficient pension saving, make sure your remuneration strategy is tax efficient, transfer assets to your spouse, and consider an IHT review.
BUSINESS TAXATION
Corporation tax rate increase
The most significant tax increase for UK businesses is the upcoming rise in corporation tax starting in April 2023. The new rates will be as follows:
- The main corporation tax rate will increase to 25% for profits exceeding £250,000.
- A new ‘small profits rate’ of 19% will apply for companies with profits of £50,000 or less.
- Businesses with profits ranging between £50,000 and £250,000 will be eligible for marginal relief.
TAX TIPS
Consider corporate structure, research and development tax credits, use of losses, bad debts, stock, and employing family members.
VAT
The VAT registration and deregistration thresholds will be frozen at £85,000 and £83,000 respectively for a further period of two years from 1st April 2024.
TAX TIP
Consider switching to a different VAT scheme to potentially reduce the administrative burden or defer the time when VAT becomes payable.
Conclusion
By being aware of the tax changes that are being introduced from April 2023, individuals and businesses can take steps to reduce their tax exposure. The tips we have provided can help you prepare your finances for the months ahead and ensure you stay on track. It is important to seek professional advice to review your individual circumstances before taking action.
Please do not hesitate to contact Southside Accountants in Wimbledon for support.
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