On 17 November 2022, the Chancellor of the Exchequer Jeremy Hunt announced many changes to the UK tax system as part of his Autumn Statement that could have a substantial impact on the amounts you and your business activity could be taxed. Most of these changes are not due to take effect until April 2023 or even the years following, but with the recent negative global economic outlook and rising costs it has never been a better time to assess your tax position and plan for the changes ahead!
We have combed through the many pages of the Autumn Statement to highlight the top 4 that may impact you and your business in the years to come:
Reduced Annual Exemption on Capital Gains
Capital Gains Tax (CGT) may arise on the disposal of certain capital assets, such as land, shares or crypto assets. Each taxpayer in the UK gets an annual exemption to exempt their first £12,300 of gains in any tax year from tax. From 1 April 2023 the annual exemption will be reduced to £6,000, and reduced further to £3,000 from 1 April 2024. This could mean additional CGT being payable should you exceed the new limits.
The tax rate of CGT will remain at 10% for basic rate taxpayers (18% for residential property) and 20% for higher rate taxpayers (28% on residential property).
Reducing Thresholds on Tax-Free Dividends
All UK taxpayers are entitled to the £2,000 dividend allowance, which means that the first £2,000 of their dividend income in a tax year is not subject to tax. However, from 6 April 2023 the dividend allowance is due to drop to £1,000, and will even be reduced further to £500 from 6 April 2024.
Additionally, back in the Spring the government announced an increase in the dividend tax rates from 7.5% (for basic rate taxpayers), 32.5% (for higher-rate taxpayers) and 38.1% (for additional rate taxpayers) to 8.75%, 33.75% and 39.35% respectively. These rates are now confirmed to stay at these new higher levels for the foreseeable future.
Freezing of Income Tax thresholds and reduction in threshold to pay 45% additional rate of tax
Tax-free personal allowances, which is currently £12,570, and the 40% tax rate threshold will be fixed for the next 6 years (until 5 April 2028). There are also changes to the 45% tax rate, which from 6 April 2023 will now apply to income above £125,140.
This means that in the 2023/24 tax year, an individual with taxable earnings over £150,000 will be pay an additional £1,243.00 in tax than they would have for the 2022/23 tax year. You may wish to take this into consideration when considering how you extract cash from your company.
Increase in Corporation Tax rates confirmed to go ahead
Currently, all UK companies pay corporation tax on their taxable profits at a rate of 19%. However, from 1 April 2023 this rate is increasing to a maximum of 25%. The highest rate will apply to companies with profits over £250,000, whereas companies with taxable profits under £50,000 will continue to pay the 19% rate. Taxable profits in between the 2 thresholds will be taxed at a hybrid rate. The £50,000 and £250,000 thresholds are also reduced if your company is part of a group or has other companies associated with it.
Get in touch
The Autumn Statement included many more changes and the above only summarises the key changes announced. If you are looking for further support or would like assistance with tax planning please do not hesitate to get in touch with the team at Starbox by calling 01273 043678.