1. Personal Allowance
The income tax personal allowance of £12,570 will be frozen until 2028. This will mean that when employees earn more, they will pay more tax and could move to the higher tax band.
2. Reduction in the additional income tax rate threshold
The income tax threshold for the higher earners will reduce from £150,000 to £125,140.
It is estimated that 250,000 more people will be brought into the additional rate.
3. Dividend and Capital Gains Allowance
If you run a limited company, you may pay yourself a dividend if you have enough profit. The dividend allowance will be cut from £2,000 to £1,000 in 2023-2024, then to £500 in 2024-2025.
As a business owner you may need to pay capital gains tax when you sell assets such as land or machinery. The capital gains tax allowance will be cut from £12,300 to £6,000 in 2023-2024 and then to £3,000 in 2024-2025.
4. Freeze in the VAT registration threshold
The VAT threshold at £85,000 will be frozen until 2026. So, if a small business earns more as a result of rising costs, they will have to register to pay VAT.
5. Business rates
From 1 April 2023 the business rate bills will be updated to reflect the change in property values since the revaluation in 2017.
- multipliers will be frozen from 2023-2024.
- a transitional relief scheme will cap bill increases caused by changes in rateable values at the 2023 revaluation.
- retail, hospitality and leisure business rates will increase from 50% to 75% in 2023-2024.
- if businesses lose their eligibility for small business rates as a result of revaluation, bill increases will be capped at £600 per year from April 2023.
6. National Living Wage increase
As per our previous blog the national living wage will increase.
7. Reduction in research and development tax relief
The research and development tax relief will be reduced to curb abuse and fraud.
The deduction rate for small business research and development will be reduced to 86% and the credit rate will be reduced to 10%.
The rate of the separate research and development expenditure credit will increase from 13% to 20%