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Tax update for 2023/24

Posted on 17th April 2023

There have been some changes that could affect you and your business in the 2021/22 tax year.

Personal Tax

The amount you can earn before paying basic rate income tax at 20% remained £12,570. The threshold for higher rate income tax at 40% has also remained at £50,270. The top additional tax rate on income has been reduced to £125,140 andremains at 45%. These levels are now frozen until 2028 (different rates apply in Scotland).

Director and shareholder salaries

If you are a company director or shareholder without any other income your tax-efficient salary for the 2023/24 tax year is likely to be £9100 and you can pay yourself dividends of up to £41,170. If you take additional dividends, you will pay higher rate taxes. However, it’s important to take in to account all your personal circumstances to confirm that this is the best approach for you.

Your dividend allowances

You can still receive £1,000 in dividends before paying tax in the 2023/24 tax year. (Reducing to £500 in 2024-25) If you take dividends above this the tax levels are unchanged:

basic-rate 8.75%

higher-rate 33.75%

additional-rate 39.35%.

National Minimum Wage and National Living Wage

Although not a tax, the levels of the National Minimum Wage and ‘National Living Wage’ have increased and the age for receiving the minimum wage has gone down from 25 years to 23 years. National Minimum wage is £10.42 for 2023-24.

Company cars

Benefit in kind (BiK) tax rates for company cars will affect vehicles first registered after 5 April 2020 with the benefit charge being set ay 2% of list price for 2023-24 and 2024-25. This will increase to 3% in 2025-26, 4% in 2026-27 and 5% in 2027-28.

Electric Vehicles will also have to pay Road Tax from 2025. This is expected to be £10 for the first year, and then fall in line with other vehicles after that.

The percentage applied to the list price of a company car is based on the published CO2 emissions from the Vehicle Certification Agency. You can use the HMRC’s figures to calculate your company car tax.

Company vans and fuel benefit for company cars

When a business pays for fuel that employees use personally or they use a company vehicle for personal use, it is a benefit in kind. The tax on this benefit increased by the Consumer Price Index (CPI) from 6 April 2021. It’s a complicated calculation so you might need some advice to decide whether it’s worthwhile for you.

Corporation Tax

Corporation Tax will increase to 25% from April 2023. There will still be a rate of 19% for businesses with profits of less than £50,000 and a tapered increase as profits rise to £250,000 when the full rate will be payable.

Business investment tax Relief

The Super deduction ends on 31st March 2023. This is being replaced by 'full expensing' This means the full amount of the expense can be offset against Corporation Tax at the relevant rate.