Year end tax review and planning ahead for 2023-24

With the end of the tax year looming, we summarise 2022-23 and outline what to expect in the financial year ahead.

In 2022-23 we have had four different Chancellors of the Exchequer and three Prime Ministers. There were three Government fiscal statements in autumn alone and we expect another series of announcements in the spring, with the next Budget scheduled for 15 March 2023.

Stealth tax rises and allowances cut

In the first of the Autumn fiscal statements the rates of all classes of National Insurance Contributions (NICs) were cut by 1.25 percentage points, from 6 November 2022. However, almost all the thresholds for both NICs and income tax have been frozen until April 2028. With inflation running at over 10%, this freeze will pull a lot of earners into the higher tax bands as their salaries or business profits rise; this also has a knock-on effect on the amount of personal savings allowance (PSA) available to set against income such as interest. Income within the PSA is taxed at a nil rate. Once into the 40% band, the PSA is cut from £1,000 to £500 per year; it disappears completely for anyone who pays income tax at 45%. In fact, the 45% threshold will be cut to £125,140 from 6 April 2023, which means many more people will lose their PSA.

What else to expect from April 2023:

  • Dividend allowance will be cut to £1,000 in April 2023, having been £2,000 for several years, and cut again to £500 from April 2024. This means more dividend income will be taxable each year, although the tax rates applicable to dividends are not changing in 2023/24.
  • The annual exemption for capital gains tax will be slashed from £12,300 to £6,000 in 2023/24 and then halved to £3,000 in 2024/25. The combination of the allowance cuts and threshold freezes will affect the tax and NICs payable by directors and shareholders of family companies.
  • The Corporation Tax rate will increase to 25% for companies with profits over £250,000 from April 2023.
  • The annual investment cap for the Seed Enterprise Investment Scheme (SEIS) will be raised from 6 April 2023, when there will also be a relaxation of qualifying conditions for those companies.
  • All employers need to budget for increases in the rates of National Living Wage and National Minimum Wage from 1 April 2023.

Between now and the end of the tax year (5 April 2023) is a good time to assess whether you have claimed all the relevant allowances and are as well defended against high tax charges as you can be.

Year end action points

  • Check if you have used all your basic rate band and dividend allowance for 2022/23.
  • Check which benefits are tax-free for 2022/23 and, to avoid P11D issues on other benefits meet the deadline for making good the benefit.
  • Consider the tax incentives for electric or hybrid company cars.
  • Consider carrying back charitable donations when completing your next tax return.
  • Can you incur qualifying R&D expenditure by 31 March 2023, before the tax relief is reduced?

Read more in our Year End Tax Review document.

Plan ahead for 2023-24: Investment and Tax Seminar

Taking place on 23 March 2023, our popular Investment and Tax event will provide an overview of the economy and current investments to consider, as part of your financial and personal tax planning for 2023/24. You can sign up for free here:

How we can help

The personal circumstances of each individual must be taken into account in deciding whether any particular plan is suitable.

If you would like more detailed one-to-one advice, get in touch with one of our friendly advisers on 01903 234094.