Key Tax Changes for the 2023/24 Tax Year

We’re here to inform you about the Key Tax Changes for the 2023/24 Tax year and how these changes will affect companies, as well as sole traders.

National Insurance

The introduction of the new “Health and Social Care Levy” in April 2023 for the self-employed, paying Class 4 National Insurance is no longer going ahead and the rise of 1.25% has been reversed. Instead, the National Insurance employee rate has been put back down to 12% – where it is expected to remain for the upcoming tax year.

From the 6th of April 2023, the Class 2 National Insurance rate will increase to £3.45 per week.

Corporation Tax

If you are a limited company with profits of £250,000 and over, your corporation tax rate is set to rise from the current rate of 19% to the new rate of 25% from the 1st of April 2023. However, if you are a small business with profits of up to £50,000, there will be no change. Instead, a Small Profits Rate (SPR) will be introduced, set at the current rate of 19%.

If your profits range between £50,000 and £250,000, the rate of tax you pay on the profits in that gap will steadily increase from 19% to 25%. To achieve this you will be able to claim an amount of Marginal Relief, which will bridge the gap between these two limits.

Making Tax Digital (MTD)

The government has delayed the compliance date for MTD for Income Tax to April 2026 – This was previously set for the upcoming 2024 tax year. Businesses, self-employed individuals and landlords with income over £50,000 will be mandated to join first; whilst those with income over £30,000 will be mandated from April 2027.

VAT Returns

A new VAT Penalty Regime for late submissions and payments, has been introduced by HMRC which started on the 1st of January 2023. Under the new regime, registered businesses will receive 1 penalty point for each late submission, with the “Point Threshold” depending on how often you submit VAT returns.

Businesses that exceed this new threshold will have to pay fines. These changes will affect everyone who submits VAT returns, including nil or repayment return customers – replacing the default surcharge.

Business Tax Relief

As a sole trader or a limited company, it is important that you are aware of the different tax reliefs and financial allowances that are available to you from HMRC. R&D tax reliefs are receiving a major change for the new tax year and while there are only 2 of these reliefs available, both are set to face reform.

The government announced the following changes in their Autumn Statement of 2022:

  • The SME credit rate will decrease from 14.5% to 10%
  • The SME additional deduction will decrease from 130% to 86%
  • For expenditure on or after the 1st of April 2023, the Research and Development Expenditure Credit (RDEC) rate will increase from 13% to 20%

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