With the end of this tax year fast approaching, we share some upcoming tax changes coming into effect in April for 23/24. We share these now as there could be some last minute actions you could take to help you maximise your tax efficiency.

Don’t miss out – change to capital allowances

Those with a limited company looking to make certain business purchases could benefit from doing so before the end of March this year.

The enhanced capital allowance period, brought in as a temporary measure back in 2021, ends on the 31^st March 2023. This means any capital expenditure made on or after 1^st April 2023 will not qualify for the 130% ‘super-deduction’. The annual investment allowance will revert back to the rate of 100% for qualifying expenditure, this includes items such as IT equipment and commercial vehicles (mainly vans and trucks).

Our view…

If you’ve been considering purchasing an item to use for your business, doing so before this enhanced allowance ends allows you to utilise fully the reliefs available. For example. . .

If you purchased a capital item for £1,000, by the 31^st March you will save £247 in tax, compared to £190 tax saving if purchased after this date.

If you are unsure which purchases could qualify, please speak to your accountant for advice or for further information read our comprehensive guide to capital allowances for limited companies.

Tax-free dividend allowance reduction

From 6^th April 2023, the annual tax-free dividend allowance for the 23/24 tax year will reduce from £2,000 to £1,000.

Our view…

You should check whether you’ve utilised all your annual dividend allowance. If you have sufficient profits available in the company, you have until 5^th April 2023 to withdraw any further dividends that are tax efficient to do so. Your accountant will advise on the best pay structure between salary and dividends, to make sure you’re at your most tax efficient. Here is our guide to salary vs dividends if you’d like some further guidance.

Corporation tax ‘main rate’ increase

On 1^st April 2023, the ‘main rate’ of corporation tax will increase from 19% to 25%.

For companies with total profits of up to £50,000 the rate will remain at 19%. For companies with total profits between £50,000 and £250,000 a tapered rate will apply.

Companies with total profits over £250,000 will pay at a rate of 25%.

While this is coming into effect on 1^st April, this will only affect the proportion of the profits made after this date and depending on your company’s next year end could mean you’re still able to utilise the 19% rate for a period. For example. . .

A September 2023 year end with £100k profit would see October to March (182 days/£49,863 of their profit) taxed at 19%, with April to September (the remaining 183 days/£50,137) taxed using the new rate.

Our view…

Facing increased corporation tax rates could mean less profits left in the company to be distributed as dividends. There are a few things you can look at here:

• Reviewing the level of your pension contributions and investing money into pensions could mean benefiting from a reduced corporation tax rate.
• Ensuring you’re utilising all your allowable expenses with a quick chat with your accountant to check what you can and can’t claim.

Additional rate threshold reduction

From 6^th April 2023, the additional rate threshold for income tax will be reduced from £150,000 to £125,140. This change will only apply to the rate threshold band, and not the tax rate.

News coming soon…

Chancellor Jeremy Hunt will announce the Spring Budget for 2023 on 15^th March. We will bring you a summary of the changes that could affect the tax you pay individually and through your company. Watch this space.