April is a big month for tax changes – here is what you need to know06/02/2023
Chancellor Jeremy Hunt announced some major adjustments at his Autumn Statement in November that might affect how much tax you pay starting in April 2023. The new tax year is expected to bring a lot of changes that will affect businesses, so it is critical to start planning for these changes now.
This article will describe the important measures that will take effect in April of this year.
Income tax brackets
The government announced a proposal to eliminate the 45% extra rate of income tax beginning in April 2023 in the Mini Budget in September. The government then announced on October 3, 2022, that they will not pursue this idea.
The point at which individuals pay the extra rate will be reduced from £150,000 to £125,140 beginning on 6 April, 2023, according to the Autumn Statement.
The personal allowance and higher rate threshold for income tax were previously set to remain at their existing levels until April 2026, and will now be extended for another two years until April 2028.
The income tax rates and thresholds for 2023-24, as compared to 2022-23, are shown below:
|Tax band||Income||Tax rate 2022/23||Income||Tax rate 2023/34|
|Personal allowance||Up-to £12,570||0%||Up-to £12,570||0%|
|Basic rate||£12,571 – £50,270||20%||£12,571 – £50,270||20%|
|Higher rate||£50,271 – £150,000||40%||£50,271 – £125,140||40%|
|Additional rate||Over £150,000||45%||Over £125,140||45%|
Cuts to the dividend allowance
The Dividend Allowance will be reduced from £2,000 to £1,000 in April 2023 and to £500 in April 2024.
Furthermore, beginning in April 2023, the tax rates on dividend income will continue as follows:
- The dividend ordinary rate – 8.75%
- The dividend upper rate – 33.75%
- The dividend additional rate – 39.35%
Corporation Tax on loans from companies
The company tax owed on directors’ overdrawn loan accounts will continue to be paid at the dividend higher rate of 33.75%.
For enterprises with income of less than £50,000, the corporation tax rate will stay at 19% beginning April 1, 2023.
Corporation tax will be paid at the main rate of 25% on profits between £50,000 and £250,000, reduced by Marginal Relief.
Profits over £250,000 will be taxed at a rate of 25%.
The government has stated that the annual capital gains tax allowance would be decreased from £12,300 to £6,000 in April 2023 and to £3,000 in April 2024.
Beginning April 6, 2023, car and van fuel benefits, as well as the van benefit charge, will rise in pace with inflation.
Research and Development
The Research and Development expenditure Credit (RDEC) rate will increase from 13% to 20% for expenditure on or after April 1, 2023, however the small and medium-sized companies (SME) extra deduction will reduce from 130% to 86% and the SME credit rate would decrease from 14.5% to 10%.
The National Living Wage (NLW) and National Minimum Wage (NMW)
The government will increase both the NLW and NMW from April 2023 as follows:
- Employees aged 23 and over: £10.42 per hour
- Employees aged 21 – 22: £10.18 per hour
- Employees aged 18 – 20: £7.49 per hour
- Employees aged 16 – 17: £5.28 per hour
- Apprentices: £5.28 per hour
The Government has shielded companies from the high energy expenses this winter with the £18 billion Energy Bill Relief Scheme.
However, Chancellor Jeremy Hunt has stated that this amount of assistance is ‘unsustainable’ and that the existing plan has always been time restricted to six months.
The Chancellor has stated that any future support, even if it is at a reduced level, will be geared to assist them in transitioning to the new higher-price environment and avoiding a cliff edge in support.
The Energy Price Guarantee will be maintained for consumers throughout the winter, restricting typical energy costs at £2,500 per year.
The Energy Price Guarantee will be increased to £3,000 in April 2023.
If you have any questions about incoming changes to the UK’s tax regime, contact JW Hinks on 0121 456 0190. Our experienced and professional tax team can ensure that you stay on the right side of regulators while not paying more than you need to.