January is a time when many businesses look to the future and plan for the year ahead. Later in the Spring, the new tax year will bring a number of changes that will impact on those businesses. Here we outline the key measures that will take effect from April 2023.
Income tax rates
At the Mini Budget in September, the government announced a plan to abolish the 45% additional rate of income tax from April 2023. It was announced on 3 October 2022 that the government would not proceed with this plan.
From 6 April 2023, the point at which individuals pay the additional rate will be lowered from £150,000 to £125,140. The additional rate for non-savings and non-dividend income will apply to taxpayers in England, Wales, and Northern Ireland. The additional rate for savings and dividend income will apply to the whole of the UK.
The income tax personal allowance and higher rate threshold were already fixed at their current levels until April 2026 and will now be maintained for an additional two years until April 2028. They will be £12,570 and £50,270 respectively.
Reduction in the Dividend Allowance
The government will reduce the Dividend Allowance from £2,000 to £1,000 from April 2023 and to £500 from April 2024.
Additionally, from April 2023, 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%.
As corporation tax due on directors' overdrawn loan accounts is paid at the dividend upper rate, this will also remain at 33.75%.
The government has announced that the capital gains tax annual exempt amount will be reduced from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024.
Research and Development
For expenditure on or after 1 April 2023, the Research and Development Expenditure Credit (RDEC) rate will increase from 13% to 20% but 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%.
Seed Enterprise Investment Scheme
From April 2023, companies will be able to raise up to £250,000 of Seed Enterprise Investment Scheme (SEIS) investment, a two-thirds increase. To enable more companies to use SEIS, 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.
From 6 April 2023, car and van fuel benefits and the van benefit charge will increase in line with inflation.
National Living Wage and National Minimum Wage uprating
The government will increase the National Living Wage (NLW) and National Minimum Wage (NMW) from 1 April 2023. The 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.
The Government has protected businesses this winter from these high energy costs through the £18 billion Energy Bill Relief Scheme.
However, Chancellor Jeremy Hunt has made it clear that this level of support is 'unsustainably expensive' and that the current scheme was always time limited to six months.
The Chancellor has said that any future support, while at a lower level, would be designed to help them transition to the new higher price environment and avoid a cliff edge in support.
For consumers, the Energy Price Guarantee (EPG) will be maintained through the winter, limiting typical energy bills to £2,500 per year. From April 2023 the EPG will rise to £3,000.
Whatever 2023 has in store, we will be on hand to keep you up to date with changes to the tax system. We are available to help with any matters related to taxes, tax reliefs and grants. Please contact us if you have any queries.