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Throughout this year, several political changes have occurred, with four different Chancellors of the Exchequer and three Prime Ministers taking office. In addition, three Government fiscal statements were released in the autumn, and another series of Budget announcements are expected next spring.
This article aims to provide essential information on the tax landscape for the next 12 months. However, consulting with us before finalizing any significant financial decisions is crucial to ensure that the tax treatment has stayed the same after publication.
In the first Autumn fiscal statement, National Insurance Contributions (NICs) rates for all classes were reduced by 1.25 percentage points from November 6, 2022. This reversed the increase in NIC rates that took effect on April 6, 2022. The current Chancellor has not made any further changes to those rates.
However, almost all NIC and income tax thresholds have been frozen until April 2028. With inflation exceeding 10%, this freeze will likely lead many earners into higher tax bands as their salaries or business profits increase, impacting the Personal Savings Allowance (PSA) available to offset income such as interest. The PSA decreases from £1,000 to £500 per year for individuals in the 40% tax bracket and disappears entirely for those paying income tax at 45%. The 45% threshold will be reduced to £125,140 from April 6, 2023, causing many people to lose their PSA.
Individuals residing in Scotland pay income tax on earnings and profits at different rates. The dividend allowance will be reduced to £1,000 in April 2023 and to £500 from April 2024. Although the tax rates applicable to dividends will not change in 2023/24, more dividend income will become taxable yearly.
The personal allowance will remain at £12,570 until April 2028 and will be reduced by £1 for every £2 of income above £100,000 per year. In addition, the annual exemption for capital gains tax will decrease from £12,300 to £6,000 in 2023/24 and halved to £3,000 in 2024/25. These changes will affect the tax and NICs payable by directors and shareholders of family companies.
Investors will receive more significant tax incentives for investing in specific start-up companies, as the annual investment cap for the Seed Enterprise Investment Scheme (SEIS) will increase from April 6, 2023. Additionally, there will be a relaxation of qualifying conditions for these companies.
From January 1, 2023, HMRC will introduce a new penalty system to encourage taxpayers to file VAT returns on time using MTD-compatible software and pay VAT liabilities promptly. In addition, employers should prepare for increases in National Living Wage and National Minimum Wage rates from April 1, 2023.
We recommend conducting an annual review of your financial affairs to ensure you are not overpaying taxes and that any previously established structures remain appropriate. Assess your financial situation and determine whether you have claimed all relevant allowances and are well-positioned against high tax charges. Individual circumstances must be considered when determining the suitability or advantage of any particular plan, and we are happy to discuss these suggestions in more detail. If you need help to plan your taxes, please contact Tax Accountant at 0800 135 7323 or email info@taxaccountant.co.uk for expert advice.