Cardiff Accountants share upcoming tax changes businesses should be aware of

As the new tax year approaches, the UK government has announced a number of changes to the tax system that will come into effect from April 2023. These changes will impact both individuals and businesses, and it is important to be aware of them to ensure compliance with the law and to optimize tax planning strategies.

Cardiff Chartered Accountants, Hodge Bakshi, are making local businesses and individuals aware of the upcoming changes and are advising them to seek advice early if needed, so they are well prepared when the new tax rules come into force in April.

These are the main changes:

Income Tax Rates

One of the key changes to income tax rates is the lowering of the additional rate threshold. From April 6, 2023, individuals earning above £125,140 will be subject to the additional rate of 45% on their non-savings and non-dividend income, a reduction from the current threshold of £150,000. The additional rate for savings and dividend income will apply to the whole of the UK.

The government has also announced that the income tax personal allowance and higher rate threshold will remain fixed at their current levels until April 2028. The personal allowance will be £12,570 and the higher rate threshold will be £50,270.

Reduction in the Dividend Allowance

From April 6, 2023, the government will reduce the Dividend Allowance from £2,000 to £1,000. This will be further reduced to £500 from April 6, 2024. Additionally, the rates of taxation on dividend income will remain as follows:

The dividend ordinary rate – 8.75%

The dividend upper rate – 33.75%

The dividend additional rate – 39.35%.

Capital Gains Tax

The capital gains tax annual exempt amount will be reduced from £12,300 to £6,000 from April 6, 2023, and then to £3,000 from April 6, 2024. This means that individuals will be able to realize less capital gains tax-free. It is important for taxpayers to consider this change when planning their investments and disposals.

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 enterprises (SME) additional deduction will decrease from 130% to 86% and the SME credit rate will decrease from 14.5% to 10%. This means that while larger companies may benefit from the increased RDEC rate, smaller companies may face a reduction in their tax relief for R&D expenditure.

Seed Enterprise Investment Scheme

From April 6, 2023, companies will be able to raise up to £250,000 of Seed Enterprise Investment Scheme (SEIS) investment, a two-thirds increase. The gross asset limit will be increased to £350,000, and the age limit from two to three years. To support these increases, the annual investor limit will be doubled to £200,000.

National Living Wage and National Minimum Wage

The government has announced that it will increase the National Living Wage (NLW) and National Minimum Wage (NMW) from April 1, 2023. The new rates will be as follows:

£10.42 an hour for those aged 23 and over

£10.18 an hour for workers aged 21-22

£7.49 an hour for 18–20-year-olds

£5.28 for 16-17-year-olds

£5.28 an hour for apprentices.

Conclusion

It is important for individuals and businesses to stay informed about any changes and to seek professional advice to ensure they are in compliance with the law and to optimize their tax planning strategies.

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References:

https://www.hodgebakshi.com/news/hot-topics/article/2023/January/what-does-2023-have-in-store