A new tax year starts today, what does this mean for you and your business?

Today is the first day of the new tax year. The 2023/24 tax year brings with it several significant changes. Some of these tax changes were recently announced at Budget 23, whilst others were announced earlier, including the Autumn Statement in 2022. Below we summary the key tax changes taking effect from today.

Capital Gains Tax allowances significantly reduced from today

First announced in the Chancellor’s Autumn Statement in November 2022, the annual allowance for Capital Gains Tax is being significantly reduced to £6,000 from today (previously, this was £12,300). It is scheduled to reduce significantly more in 2024, down to £3,000. This can have a significant impact on those selling investment property, second homes or other taxable assets. Further information on this can be found here.

Capital Gains Tax treatment in divorce extended

Whist the Capital Gains Tax annual allowance has now been reduced, how Capital Gains Tax is applied to assets during the divorce of a married couple/civil partnership has been allowing more time for no gain/no loss transfers. The legislation now allows the following:

Spouses or civil partners separating, up to 3 years following the year in which they cease to live together to facilitate no gain or no loss transfers.

The no gain or no loss treatment is to also apply to other assets separating spouses/civil partners transfer between each other, when it forms part of a formal divorce agreement.

When a spouse/civil partner retains an interest in the former matrimonial home, they will be allowed the option to claim Private Residence Relief (PRR) on its sale.

You can read more on this on our website here

Additional rate tax threshold reduced

The additional rate threshold for Income Tax (ART) is now lowered to £125,140 (from £150,000).

The Government estimates that between 2023 to 2024, this will impact circa 792,000 taxpayers where circa 232,000 will pay the additional rate of tax who previously would not have. For those where this applies, they should consider tax planning measures to assist.

Pension changes for the new tax year

The tax-free yearly allowance which can be placed into a person’s pension pot has now significantly risen from £40,000 to £60,000. This had previously been frozen for nine years.

The adjusted income threshold for the Tapered Annual Allowance (TAA) has  increased from £240,000 to £260,000.

Alongside these changes, the MPAA has been increased from £4,000 to £10,000. The MPAA, or Money Purchase Annual Allowance, is the amount that you can still contribute to your defined contribution pension and still obtain tax relief once you start to withdraw money from it.

This is important for those wishing to increase pension contributions, this can provide additional tax benefits, both in the short and long term.

Corporation Tax is increased from today

The main rate of Corporation Tax paid by businesses on taxable profits over £250,000 has now increased to 25%.

Those companies whose profits are between £50,000 and £250,000 will now pay between 19% and 25% of Corporation Tax.

Research and Development Tax Relief – how to benefit in the new tax year

An enhanced credit rate for R&D, whereby qualifying small or medium businesses who spend 40% or more of their total expenditure on R&D, can claim a credit worth £27 for every £100 they spend is now available.

The full range of R&D changes, together with the currently available allowances can be found here. We would urge all businesses to review this as it can provide considerable tax savings to many companies.

Capital Allowances

Expensing for Capital Allowances was announced at Budget 2023. This now allows 100% first-year relief on qualifying new main rate plant and machinery investments, which will now apply up to 31/03/2026.

A 50% first-year allowance (FYA) is also available for expenditure by eligible companies on a new special rate (which includes long life assets) until 03/03/2026.

Additionally, the Annual Investment Allowance (AIA) which provides 100% first-year relief for plant and machinery (P&M) investments up to £1 million is available to all businesses including unincorporated businesses and most partnerships.

Frozen tax allowances in the new tax year mean a reduction in real terms

Many tax allowances have been frozen. Factoring in Inflation, this equates to reduced allowances in real terms. These include the following:

  • The personal allowance for Income Tax remains at £12,570
  • The higher rate threshold remains at £50,271
  • The Main National Insurance thresholds (The Class 1 primary threshold is £12,570 per year)
  • The Inheritance Tax threshold remains at £325,000

Additionally, the threshold for VAT registration is maintained at £85,000 (until at least March 2026).

Alexander & Co- tax planning advice for the new tax year

Our tax team at Alexander & Co can offer advice to both businesses and individuals to plan effectively and help you become more tax efficient. Given the ever-changing, complex legislation this is an area most can benefit from.

Research and Development Tax credits can prove beneficial for many companies, whilst our private client tax team can assist with many issues for individuals, including Capital Gains Tax and Inheritance Tax planning.

Please contact us by completing the form on this page, or email info@alexander.co.uk for further information on how we can assist you.

Further Reading:

Tax brackets 2023 – our guide to the 23/24 tax year tax rates

Capital gains tax (CGT) allowances to be reduced from April 2023

R&D Tax Credits – additional changes from Budget 2023

Financial settlement in divorce – important capital gains tax changes

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