Pre Budget March 2023

As we approach the end of the tax year, we want to keep you informed about the upcoming tax changes that may affect your business. Ahead of Chancellor Jeremy Hunt’s first Spring Budget announcement this afternoon, we’ve compiled a summary of the key tax changes expected to come into effect from April.

Already Announced Changes From April 2023

A quick reminder of what is set to take effect from next month barring any changes made in todays Budget:

Additional rate of income tax – reduced threshold
From April 2023, the threshold for paying the 45% additional rate of tax has reduced from £150,000 to £125,140.

Dividend Allowance to decrease
The tax free dividend allowance will be reduced to £1,000 in 2023-24, and then to £500 in 2024-25.

Capital gains tax (CGT) allowance cut
A reminder that the annual exempt amount for capital gains tax will be cut from £12,300 to £6,000 in April and then again to £3,000 from April 2024.

Corporation tax changes
Starting from 1st April 2023, the corporation tax rate is set to rise to 25% for companies with profits of £250,000 or more. Business profits up to £50,000 will maintain the current 19% corporation tax rate. For businesses with profits falling between these two thresholds, a tapered rate will apply.

Super deduction for companies ending
The super-deduction is due to come to an end from 31 March 2023 and any plant and machinery expenditure incurred after this date will not qualify for the super-deduction.
If you are planning on buying any plant and machinery it may be worth doing so before the 31 March. Remember this allowance only applies to new equipment purchases.

The Spring Budget March 2023

Energy prices
Just announced this morning was extension to the Energy Price Guarantee at current levels – £2,500 – for a further three months.

Corporation Tax
One of the key concerns for companies is the planned increase in corporate tax. Some Conservative MPs have raised concerns the plans to increase corporation tax will stifle growth. But the chancellor is expected to confirm today that the increase will go ahead and instead introduce other tax breaks in an attempt to mitigate the impact of the corporation tax increase and the end of other support schemes.

Childcare support
Anticipated in the Budget this afternoon is further support for childcare for working parents. Currently, working parents with three and four year old children are eligible for 30 free hours of childcare per week. It is expected that this measure will expand to include children aged one and two in a bid to strengthen the UK workforce.

Check Your National Insurance Record

The government has extended the deadline for voluntary National Insurance contributions (NICs) to 31st July 2023, giving taxpayers more time to fill gaps in their records and maximize their future State Pension benefits. Here’s a summary of what you need to know:

1. The extension was granted due to concerns about bottlenecks in the system affecting accurate National Insurance and pension assessments.
2. Voluntary NICs can be paid to fill gaps in your record, potentially increasing your State Pension entitlement and other state benefits.
3. Voluntary contributions are typically limited to the past six years, but transitional arrangements ending on 5th April 2023 allow for contributions to be made as far back as 2006 for men born after 5th April 1951 and women born after 5th April 1953.
4. To take action, check your National Insurance contributions record online through your Government Gateway account, review your contribution history, and contact HMRC if needed. Calculate the cost of voluntary contributions and consider making up any shortfall before the opportunity is lost.

Before making voluntary contributions, use Martin Lewis’s calculator on the Money Saving Expert website to determine the most beneficial level of contribution for your situation.

You can also contact the Future Pensions Centre online or on 0800 731 0175, who will be able to advise the best and cheapest years to pay and the implications to your pensions forecast.

New VAT Penalty System

Recent changes to VAT penalties that came into effect on 1st January 2023 aim to make the penalty system fairer and more proportionate for businesses that submit their VAT returns or pay their VAT late.

Here’s a brief summary of the key changes:

1. Late submission penalties now operate on a points-based system. Each late VAT return earns a penalty point, and once the penalty point threshold is reached, a £200 penalty applies. Additional £200 penalties apply for each subsequent late submission.
2. Late payment penalties apply if VAT payments are more than 15 days overdue. A second late payment penalty is added if payments are more than 30 days overdue.
3. To help businesses adjust, HMRC won’t charge a first late payment penalty for VAT payments due on or before 31st December 2023, provided that the payment is made in full or a payment plan is agreed within 30 days of the due date.

Director Salary Schedules 2023/2024

Once the full deatils of todays budget are set in next Thursday’s Finance Bill, we will be in touch regarding tax-effective director salaries for the upcoming tax year.

We’re here to help you navigate these changes and ensure your business remains compliant and well-informed. If you have any questions or concerns, please don’t hesitate to reach out to your account manager.