1. VAT
The VAT registration threshold remains frozen at £85,000 turnover until 31 March 2026. However, this threshold is subject to fiscal drag, which means that increasing turnover could result in the total turnover being subject to VAT. This could be particularly challenging for businesses operating in a B2C model experiencing inflationary cost increases.
2. Income Tax
Basic rate taxpayers will not experience any reduction in their Income Tax, which will remain at 20% for non-savings and non-dividend earnings between £12,570 and £50,270.
On the other hand, higher earners who currently pay a tax rate of 45% on earnings over £150,000 will see a decrease to £125,140, which implies that some taxpayers who pay 40% will pay an additional 5p in the £.
3. R&D tax relief
The tax breaks available for R&D are being restricted to prevent abuse, with the cash credit reduced from 14.5% to 10% for loss-making businesses. At the same time, larger companies and some SMEs will receive increased payments under a separate scheme.
4. Corporation Tax
The Corporation Tax rise, previously announced, will increase from a universal 19% rate to a tapered rate starting at 19% for profits up to £50,000 rising to a peak of 25% for businesses with profits over £250,000. This kicks in from April 2023.
5. Business Rates
There will be a freeze on Business Rates for 2023-24. Additionally, eligible retail, hospitality, and leisure businesses will receive increased support of 75% business rates relief, up to £110,000 per business, instead of the previous 50%.
6. Inheritance Tax
The Inheritance Tax threshold of £325,000 will remain frozen until 2027-28, along with the additional £175,000 potentially available for passing on main residences.
7. Super Deduction
The “Super Deduction” of 130% for companies investing in new equipment will cease on 31 March 2023, returning to the pre-pandemic rate of 100% of the cost of plant and equipment instead.
8. Dividend Allowance
- Basic Rate dividends will be taxed at 8.75% (if the total earnings are less than £50,270)
- Higher rate dividends will be taxed at 33.75% (if the total earnings are between £50,270 – £125,140)
- Additional rate dividends will be taxed at 39.35% (if the total earnings exceed £125,140).
These taxes will be applied to the shareholder after the company has paid Corporation Tax on its activities.
9. National Insurance (NI)
Similarly, Self-Employed NI rates will remain frozen, with a rate of 9% on profits above the lower threshold (up to £50,270).
10. Capital Gains Tax (CGT)
The annual exemption, which is the amount of gains that can be made in a tax year without incurring tax, will be reduced from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024. This will particularly impact those selling investments and second homes.
11. Stamp Duty Land Tax (SDLT)
The maximum value of a property on which first-time buyers can claim relief has also been increased to £625,000. These measures will remain in place until April 2025.
12. Annual investment allowance
A previously temporary uplift in tax allowances on plant, machinery and equipment, which allowed 100% of the cost to be offset against taxable profits in the year of purchase, is being retained at £1 million permanently.
