In line with recent updates this is a brief Budget comment with mention of a few other topics:
- Budget Headlines
- Making Tax Digital
- Re-Basing
- Government Gateway
- Pensions Again
- Reporting UK Property Capital Gains
Budget Headlines
- As previously announced: Corporation Tax rises to 25% from 1 April 2023 for profits greater than £250,000; small businesses with profit of £50,000 or less continue to pay the current 19% with a sliding scale in between.
- The Pension Lifetime Allowance of £1,073,100 has been abolished (see comment below)
- The Pension Annual Allowance of £40,000 increases to £60,000 from 6 April 2023
- The Pension Tapered Annual Allowance income level of £240,000 increases to £260,000 from 6 April 2023.
- The Pension fully tapered Annual Allowance increases from £4,000 to £10,000.
- As previously announced the Capital Gains Tax Annual Exemption is down from £12,300 to £6,000 from 6 April 2023 and then to £3,000 from 6 April 2024
- Capital expenditure for companies will be 100% deductible from 1 April 2023. Little impact to our clients here as the Annual Investment Allowance of £1,000,000 remains available.
- National Insurance was increased by 1.25% from April 2022 (to fund the Health and Social Care Levy). In a move to capture a similar increase from those paying themselves with dividends, the Dividend Tax rates (7.5%, 32.5% and 38.1%) all increased by 1.25% at the same time – as previously announced.
- From 1 April 2022 significant changes to late payment and late submission penalties (these won’t affect you if you do everything on time!)
Making Tax Digital (MTD)
Last year we noted: ‘there’s a revolution on its way (slowly!). First announced in the April 2015 Budget, ‘MTD’ will really hit home from April 2024’. Well it has been put back again – this time to April 2026!
Re-Basing hasn’t been delayed (if you are Self Employed, see below for what we said last year).
Up to now the MTD impact has only been felt by VAT registered businesses and it hasn’t been that big an impact. All of these businesses were reporting quarterly already – so not a big deal to report it in a slightly different way!
From April 2026, many Self Employed and property landlords will have to transition from doing one Tax Return a year to 5 (five!). I’ve said before that there is a revolution on the way and this is what I mean.
The timing has been significantly delayed. So far it has happened for all VAT registered businesses.
And the scale has been reduced. At present, Self Employed and Landlords with income above £50,000 will be required to follow MTD rules from April 2026. For those with income over £30,000 it will be from April 2027. Previously it was intended that anyone with income over £10,000 had to comply! Further details to follow…
Re-Basing
No change here. For the Self Employed with an Accounting Date other than 31 March (or 5 April) the big talking point is the re-basing of the accounting year to 31 March. This involves a ‘Transitional Year’ (ending 5 April 2024) with a longer accounting period but with the deduction of Overlap Relief (this is the technical term for profits that were taxed twice back in 1997).
So for a Self Employment with an Accounting Date of 30 April, this means the following accounting periods:
In the year to 5 April 2022 – normal to 30/4/21
In the year to 5 April 2023 – normal to 30/4/22
In the year to 5 April 2024 – transition: 1/5/22 to 31/3/24 less Overlap Relief
In the year to 5 April 2025 – new normal to 31/3/25 with quarterly reporting
In the year to 5 April 2026 – new normal to 31/3/26 with quarterly reporting
The message for a thriving business is to watch out for the tax payable on 31 January 2025!
Government Gateway
You may have heard the expression ‘Government Gateway’. It is becoming more and more a feature of everyday life and essential for Making Tax Digital! If you haven’t registered then we recommend that you do so – it’s good to be prepared!
Follow the link here: www.gov.uk/personal-tax-account/sign-in/prove-identity
Just to be clear, we deal with your Self Assessment (and where applicable) Company Corporation Tax through our own Agent Government Gateway but we cannot set up your individual Gateway. There are a number of areas for which it is required. For example:
- Reporting UK residential property sales (see above!)
- Applying for time to pay your tax liability
- Accessing your Personal Tax Account
- Submitting Making Tax Digital VAT Returns
- Submitting Making Tax Digital Rental Income Returns (to follow)
- Applying for your State Pension forecast
Pensions
This is an increasingly complex area for which we recommend specialist advice but here are a few things to look out for if you have a high value ‘pot’.
Note the changes shown above in the Budget – so let’s tuck in! Not so fast… Labour have already announced that they would reverse the abolition of the Lifetime Allowance (LTA). Subject to the specialist advice mentioned, if your pension pot is £1,000,000 or more, we’d be inclined not to contribute because:
- Labour have pledged to bring the LTA back (we don’t know how or to what extent)
- If you contribute and you have ‘protection’ in place – you would lose that ‘protection’ if labour reintroduce the LTA
- Additional contributions would not enjoy the 25% tax free cash (one of the main reasons for contributing) – this is because, whilst removing the LTA, they introduced a cap on tax free cash!
Reporting UK Property Capital Gains
For all UK residential property sales since 5 April 2020, where tax is due, you must submit a Capital Gains Tax Return within 60 days of the completion – the estimated Capital Gains Tax (CGT) is due at the same time. Penalties and interest will be charged on late submissions. We say ‘estimated’ because CGT rates depend on your level of income and you may subsequently realise a loss that can be offset.
It is clear that many Solicitors don’t consider it to be their responsibility to point out this obligation so please inform us immediately on sale if you are unsure whether your Solicitor is dealing with the Return…
The sale will also still form part of your Self Assessment Tax Return for the year in question.
The comments above are brief highlights and each item is subject to change, please note the full chart of Rates and Allowances below and remember – there is always more to it than meets the eye so please contact us before taking or refraining from action.
Rates and Allowances for 2023 and 2024
Rates and allowances for Income Tax, Corporation Tax, Capital Gains Tax, and Inheritance Tax are set out below.
| 2022-23 (£) | 2023-24 (£) | Increase (£) | |
| Income Tax allowances | |||
| Personal allowance Personal allowance (age 65-74) Personal allowance (age 75 and over) |
12,570 N/A N/A |
12,570 N/A N/A |
0 0 0 |
| Income limit for under 65 personal allowance Income limit for age-related allowances |
100,000 N/A |
100,000 N/A |
0 0 |
| Married couple’s allowance for people born before 6 April 1935 Minimum amount of married couple’s allowance Blind person’s allowance |
9,415 3,640 2,600 |
10,375 4,010 2,870 |
960 370 270 |
| Capital Gains Tax annual exempt amount: Individuals etc. Trustees Main Rate Lower Rate Main Rate (for gains on residential property) Lower Rate (for gains on residential property) |
12,300 6,150 20% 10% 28% 18% |
6,000 3,000 20% 10% 28% 18% |
|
| Inheritance Tax Nil rate band limit Residence nil rate band limit Main Rate |
325,000 100,000 40% |
325,000 175,000 40% |
|
| Taxable bands 2022-23 (£) | Taxable bands 2023-24 (£) | ||
| Starting rate 10% | – | Starting rate 10% | – |
| Basic rate 20% | 0 – 37,700 | Basic rate 20% | 0 – 37,700 |
| Higher rate 40% | 37,701 – 150,000 | Higher rate 40% | 37,701 – 125,401 |
| Additional rate 45% | Over 150,000 | Additional rate 45% | Over 125,401 |
| Income tax rates | ||
| Tax year 2022-23 | Tax year 2023-24 | |
| Basic rate | 20% | 20% |
| Higher rate | 40% | 40% |
| Additional rate | 45% | 45% |
| Dividend ordinary rate – for dividends otherwise taxable at the basic rate (effective rate with tax credit) |
8.5% | 8.5% |
| Dividend upper rate – for dividends otherwise taxable at the higher rate (effective rate with tax credit) |
33.75% | 33.75% |
| Dividend additional rate – for dividends otherwise taxable at the additional rate (effective rate with tax credit) |
39.35% | 39.35% |
| Dividend allowance From April 2016, the new Dividend Allowance means that individuals will not have to pay tax on the first £5,000 of dividend income they receive. |
£2,000 | £1,000 |
|
Personal savings allowance
Higher rate taxpayers will not have tax to pay on their first £500 of savings income. |
£1,000
£500 |
£1,000
£500 |
| Starting rate for savings | ||
| Tax year 2022-23 | Tax year 2023-24 | |
| Starting rate for savings | 0% | 0% |
| Starting rate limit for savings | £5,000 | £5,000 |
| Corporation Tax Profits | ||
| Tax year 2022-23 | Tax year 2023-24 | |
| Main rate | 19% | 25% |
| Small profits rate | N/A | 19% |
| Lower threshold | N/A | £50,000 |
| Upper threshold | N/A | £250,000 |
| Marginal relief | N/A | 3/200ths |
National Insurance
|
Tax Year 2022/2023 |
Tax Year 2023/2024 |
|||||
| Class 1 Employees (Primary) | ||||||
| On first (pw) | 242 | Nil | 242 | Nil | ||
| Between (pw) |
242-967 | 12% | 242-967 | 12% | ||
| Over (pw) |
967 | 2% | 967 | 2% | ||
| Class 1 Employers (Secondary) | ||||||
| On first (pw) | 175 | Nil | 175 | Nil | ||
| Over (pw) | 175 | 13.8% | 175 | 13.8% | ||
| Employers’ contracted-out rebate, salary related schemes | N/A | N/A | ||||
| Employers’ contracted-out rebate, money purchase schemes | Abolished | Abolished | ||||
| Class 2 Self employed | ||||||
| Above Lower Profits Threshold (pw) | 3.15 | 3.45 | ||||
| Small Profits Threshold (pa) | 6,725 | 6,725 | ||||
| Lower Profits Threshold (pa) | 11,908 | 12,570 | ||||
| Special Class 2 rate for share fisherman (pw) | 3.80 | 4.10 | ||||
| Special Class 2 rate for volunteer development workers (pw) | 6.15 | 6.15 | ||||
| Class 3 Voluntary | ||||||
| Flat rate (pw) | 15.85 | 17.45 | ||||
| Class 4 Self employed | ||||||
| On profits between (pa) | 11,908 – 50,270 | 9.73% | 12,570-50,270 | 9% | ||
| above 50,270 | 2.73% | above 50,270 | 2% | |||
Stamp Taxes – Rates
Transfers of property (consideration paid)
| Rate | All land in the UK | Rate | All land in the UK |
| Non-Residential | Additional residential property | ||
| Zero | £0-150,000 | 3% | £0-250,000 |
| 2% | On next £100,000 | 5% | On next £675,00 |
| 5% | On the rest | 10% | On next £575,000 |
| 12% | On the rest (above) £1,500,000 |
The rate of stamp duty / stamp duty reserve tax on the transfer of shares and securities is unchanged at 0.5%.
| Value Added Tax (VAT) | ||
| April 2022-23 | April 2023-24 | |
| Standard rate | 20% | 20% |
| Reduced rate | 5% | 5% |
| Zero rate | 0% | 0% |
| Exempt | n/a | n/a |
| Value Added Tax (VAT) – Registration and Deregistration thresholds | ||
| From April 2022 | From April 2023 | |
| VAT – registration threshold | 85,000 | 85,000 |
| VAT – deregistration threshold | 83,000 | 83,000 |