The Chancellor made his Budget Speech Wednesday 15 March.
We have provided a brief summery below of items we think will be useful for our clients.
Income tax rates and allowances
There were no changes announced to Income tax rates and allowances, these remain locked until 2028.
However, something to note is that from 6 April 2023 the dividend allowance reduces from £2,000 to £1,000. This will reduce to £500 from 6 April 2024.
The basic tax rates for dividends are:
Basic rate 8.75%
Higher rate 33.75%
Additional rate 39.35%
As corporation tax due on directors’ overdrawn loan accounts is paid at the dividend upper rate, this will also remain at 33.75%.
Pensions Tax reform
The pensions annual tax-free allowance will increase from £40,000 to £60,000 and the Lifetime allowance will be abolished to help highly skilled individuals continue to work for longer.
For some company owners, who wish to keep their company profits down due to the increases in corporation tax mentioned below, this will come as welcome news.
Sole traders and individuals wanting to save on their tax bills will be able to pay more than they previously could again this will be welcome news for those individuals if cash is available to take advantage of this increase in the allowance.
These changes will take effect from April 2023.
From 1 April 2023, the rate of corporation tax that a company pays is changing. This was previously announced in the Autumn statement.
The rate depends on the level of profits of a company and is based on a comparison of the company’s profits against the corporation tax thresholds of £50,000 (the lower limit) and £250,000 (the upper limit). The rate of corporation tax is 19% if profits do not exceed the lower limit (known as the small profits rate) and 25% where profits are greater than the upper limit. Where a company’s profits fall between the lower and upper limits, it will pay tax at the main rate of 25% but be entitled to marginal relief.
This means if you have company profits up to £50,000 the rate is 19%
If your company profits are between £50,000 and £250,000 the first £50,000 is taxed at the lower rate of 19% and profits between £50,000-£250,000 will be taxed at a marginal rate.
The Government has confirmed that the same main rate and same profits rate will apply for the financial year beginning 1 April 2024
From April 2023:
Companies incurring qualifying expenditure on new plant and machinery before 1 April 2026 will be able to claim either a 100% or 50% First Year Allowance (FYA). The 100% allowance is known as ‘full expensing’.
The temporary £1m Annual Investment Allowance (AIA) limit is made permanent.
100% FYAs on electric vehicle charge-points are extended to 31 March 2025 for Corporation Tax purposes and 5 April 2025 for Income Tax purposes.
Download the full report here Jonathan_Ford_&_Co_Limited_Spring Budget 2023
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