Personal and Business Tax for 2023-24
6th April 2023 marks the start of the New Tax Year.
I have put together this blog to highlight the main tax matters that affect individuals and businesses.
Personal Tax, thresholds and allowances
The Personal Allowance (amount you can earn before paying income tax) remains at £12,570 for the 2022-23 and 2023-24 tax years.
| Tax Year | 2023-24 | 2022-23 |
|---|---|---|
| Basic Rate Tax 20% | £12,571 to £50,270 | £12,571 to £50,270 |
| Higher Rate Tax 40% | £50,271 to £125,140 | £50,271 to £150,000 |
| Additional Rate of Tax 45% | Above £125,140 | Above £150,000 |
- Please note, the above table assumes that the individual receives the personal allowance.
- If the individual earns over £100,000 , the personal allowance is reduced by £1 for every £2 earned over the £100,000
Director Salary recommendation for maximising tax efficiency
- We recommend to pay single company Directors in the 2023/24 tax year a salary of £12,570, the reason for this is all down to the National Insurance (NI) rates, as it saves more in corporation tax, you are paying 13.8% (NI Rates) on £3,470 (£12,570 – £9,100) rather than 19% Corporation Tax.
- The lower earnings limit for NI in 2023/24 is £6,396 per annum. If you earn over this amount it will count as a qualifying year for your future state pension.
- The primary earnings limit for NI in 2023/24 is £12,570 per annum. If your annual salary exceeds this amount, then you the employee will need to pay NI contributions.
- The secondary earnings limit for NI in 2023/24 is £9,100 per annum. If your annual salary exceeds this amount the employer (your business) will need to pay NI contributions.
- The optimum in 2023/24 is to pay £12,570 but not a penny more. This ensures the taxpayer qualifies for the state pension but does not need to pay any employee contributions. Yes, you have read this correctly! You can qualify for a state pension without making any personal NI contributions.
Please note. There are numerous assumptions made when concluding the above recommendation, when calculating your optimum directors salary 2023/24 you must look into individual circumstances.
Dividend Allowance
The Tax-Free Dividend Allowance for the 2023/24 tax year is £1,000 (£2,000 for the 2022/23 tax year).
| Tax Band | 2023-24 rates | 2022-23 rates |
|---|---|---|
| Basic Rate | 8.75% | 8.75% |
| Higher Rate | 33.75% | 39.35% |
| Additional Rate | 33.75% | 39.35% |
Company Cars
- As an employer, if you provide company cars or fuel for your employees’ private use, you’ll need to work out the taxable value so you can report this to HM Revenue and Customs (HMRC).
- Fully electric cars are charged at 1% of their list price in the 2021/22 tax year, and increased to 2% in 2022/23 and remain the same for 2023/24.
Personal Savings
- The band of savings income that is subject to the 0% starting tax rate remains at its current level of £5,000 for the 2023/23 tax year.
- The adult ISA annual subscription limit for the 2023/24 tax year remains unchanged at £20,000.
- The annual subscription limit for Junior ISAs and Child Trust Funds for the 2023/24 tax year is unchanged at £9,000.
Personal Pensions
- The tax-free amount you can pay into a personal pension is £60,000 for the 2023/24 tax year (up from £40,000 in 2022-23).
- Any pension payments you make over the £60,000 limit will be subject to income tax at the highest rate you pay.
- The lifetime allowance for pension savings was at £1,073,100 but this will be completely abolished from 6 April 2024, meaning there will be no cap on how much you can build up in pension benefits while continuing to get tax relief.
Capital Gains Tax
- The Capital Gains Tax annual exempt amount for individuals has fallen to £6,000 from April 2023 (was £12,300 for 2022/23 tax year).
- It will fall again to £3,000 from April 2024.
Inheritance Tax
- There is no change to the Inheritance Tax (IHT) nil rate band, the threshold remains at £325,000 and is frozen at that level until 2026.
Business Asset Disposal Relief
- The Business Asset Disposal Relief lifetime allowance limit remains capped at £1 million.
Corporation Tax
- Corporation Tax payable on company profits remains at 19% for the 2023/24 tax year for those with profits below £50,000.
- The top rate will be 25% for those with profits in excess of £250,000. For those with profits between £50,000 and £250,000 a marginal percentage rate will be applied.
Workplace Pensions
- There are no changes to the minimum amount you need to pay into your employee’s auto-enrolment workplace pension.
- This means the total amount of employer and employee contributions remains a minimum of 8% of your employee’s qualifying earnings.
Annual Investment Allowance
- The Annual Investment Allowance of £1 million has been made permanent.