With all the recent changes to tax legislation and the late Autumn statement, it would be easy to lose track of which announcements for the upcoming tax year are still in place, and which were revoked or adjusted.
Let’s start with a few things that will be staying the same; the personal allowance for 2023/24 is held at its current rate of £12,570, as is the next band of earning for which you pay tax at the basic rate, that’s remaining at £37,700. From that point on we will start to see some changes, the point at which the additional rate of tax is payable is reducing from earnings over £150,000 to £125,140
For those that receive income from dividends, currently the first £2,000 received is taxed at a nil rate, for 2023/24 this will reduce to £1,000, and is set to reduce further to £500 for 2023/24 onwards. The tax rates applicable to dividends over this limit increased at the start of the current tax year and will remain the same for 2023/24 at 8.75% to the extent the income falls within your basic rate tax band, 33.75% in the higher rate band, and 39.35% in the additional rate band.
We saw changes to both the rates and the thresholds applicable to National Insurance during the current tax year. With the withdrawal of the proposed Health & Social Care Levy, the increase in NI rates is being reversed back to earlier levels, with the main rates Primary Class 1 National Insurance (paid by employees) returning to 12% (2% above the upper earnings limit), Secondary Class 1 NI (paid by employers) at 13.8%, and Class 4 NI (paid on self-employment earnings) at 9% (2% above the upper profit limit of £50,270). The Employment Allowance, available to qualifying Employers to offset the amount of secondary NI payable will remain at £5,000 after it was increased from £4,000 last year.
The Capital Gains Tax annual allowance is set to reduce from its current level of £12,300, to £6,000 in 2023/24, and then to £3,000 in 2024/25. The annual allowance is deducted from the capital gains made in a tax year, and any gains in excess of this are taxed at the CGT rates which remain unchanged from the 2022/23 rates. Given the reducing allowances, in some cases it would be worth accelerating gains into the 2022/23 year to make use of the higher available amounts.
By Liz Lockwood, Manager, Ensors Accountants LLP
This information is given by way of general guidance only, and no action should be taken based solely on the information contained herein. No liability is accepted by the firm for any actions taken without seeking appropriate professional advice.