New tax year 2023-24 – changes you need to know about for your business

The new tax year arrived on 6 April 2023. Like many business owners, you may have been too busy to make the necessary preparations or even think about what that entails. But don’t worry – that’s what we’re here for. Read on to find out what changes the new 2023-24 tax year brings.

Key changes for the new tax year – 2023-24

The most notable changes for the new tax year are Corporation Tax rates, the halving of the annual dividend allowance, and the lowering of the additional-rate Income Tax threshold.

These adjustments will affect many limited company directors and shareholders, in addition to approximately 250,000 top earners in the UK.

The rates of Income Tax remain the same for England & Wales and Northern Ireland, but there have been some adjustments to Scottish Income Tax higher and top rates.

Other than a 30p/week increase to Class 2 National Insurance contributions, no other changes to National Insurance have taken place.

VAT rates and thresholds remain unchanged, which is good news for VAT-registered businesses.

Corporation Tax

On 1 April 2023, the main rate of Corporation Tax increased from 19% to 25%. The rate now applies to all profits generated by companies with annual profits over £250,000.

A small profits rate of 19% now applies only to companies with profits up to £50,000.

Companies with profits between the small profits rate (£50,000) and the main rate (£250,000) will pay tax at 25% reduced by a ‘Marginal Relief‘, which provides a gradual increase in the effective Corporation Tax rate.

Dividend allowance

The dividend allowance for the 2023-24 tax year has been halved and is now just £1,000. From April 2024, it will be reduced again to £500. The rates of dividend tax, however, remain the same: 8.75% basic rate, 33.75% higher rate, and 39.35% additional rate.

Income Tax

There are no changes to Income Tax rates in England & Wales and Northern Ireland for the new tax year. However, the additional-rate Income Tax threshold has been lowered from £150,000 to £125,140. There have also been some adjustments to the higher rate and top rate of Scottish Income Tax.

The tables below illustrate the rates and thresholds for 2023-24.

Income Tax bands and thresholds in England & Wales and Northern Ireland

Income Tax band	2023-24 thresholds	2022-23 thresholds
0% (Personal Allowance)	Up to £12,570	Up to £12,570
20% (Basic rate)	£12,571 to £50,270	£12,571 to £50,270
40% (Higher rate)	£50,271 to £125,140	£50,271 to £150,000
45% (Additional rate)	Over £125,140	Over £150,000

 

Income Tax bands and thresholds in Scotland

Income Tax band	2023-24 thresholds	2022-23 thresholds
0% (Personal Allowance)	Up to £12,570	Up to £12,570
19% (Starter rate)	£12,571 to £14,732	£12,571 to £14,667
20% (Basic rate)	£14,733 to £25,688	£14,668 to £25,296
21% (Intermediate rate)	£25,689 to £43,662	£25,297 to £43,662
42% (Higher rate)	£43,663 to £125,140	(41%) £43,663 to £150,000
47% (Top rate)	Over £125,140	(46%) Over £150,000

National Insurance contributions (NICs)

Class 1 National Insurance contributions (NICs) are paid by employees (on their wages) and employers (on their employees’ wages). For 2023-24, the main rates of National Insurance remain unchanged – 12% for employees and 13.8% for employers.

Similarly, there are no changes to Class 4 National Insurance for those who pay taxes through Self Assessment, including sole traders, members of partnerships and LLPs, and limited company shareholders. The Class 4 main rates remain at  9% and 2%, but Class 2 contributions have risen from £3.15 per week to £3.45 per week.

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The table below sets out the National Insurance rates and thresholds for the new tax year 2023-24 compared to 2022-23

Class 1 National Insurance rates and thresholds

	2023-24	2022-23
Employees Class 1 NICs	12% on earnings between Primary Threshold (PT) and Upper Earnings Limit (UEL) 2% on earnings above UEL	From 6 April to 5 November 2022: 13.25% between PT and UEL 3.25% on earnings above UEL From 6 November 2022 to April 5 2023: 12% on earnings between PT and UEL 2% on earnings above UEL
Employer Class 1 NICs	13.8% on employees’ wages above the Secondary Threshold (ST)	From 6 April 2022 to 5 November 2022: 15.05% on employees’ wages above the ST From 6 November 2022 to 5 April 2023: 13.8% on employees’ wages above the ST
Lower Earnings Limit (LEL)	£123 per week £533 per month £6,396 per year	£123 per week £533 per month £6,396 per year
Primary Threshold (PT)	242 per week £1,048 per month £12,570 per year	£11,908 annualised threshold, as a result of mid-year adjustments shown below. From 6 April to 5 November 2022: £190 per week £823 per month £9,880 per year From 6 November 2022 to 5 April 2023: £242 per week £1,048 per month £12,570 per year
Secondary Threshold (ST)	£175 per week £758 per month £9,100 per year	£175 per week £758 per month £9,100 per year
Upper Earnings Limit (UEL)	£967 per week £4,189 per month £50,270 per year	£967 per week £4,189 per month £50,270 per year

 

Class 2 and Class 4 National Insurance rates and thresholds

	2023-24	2022-23
Class 2	£3.45 per week when profits exceed Lower Profits Threshold (LPT) of £12,570/year	£3.15 per week when profits exceed LPT of £11,908/year
Class 4	9% on profits between Lower Profits Limit (LPL) and Upper Profits Limit (UPL) 2% on profits above UPL	9.73% on profits between LPL and UPL 2.73% on profits above UPL
Small Profits Threshold (SPT)	£6,725 per year	£6,725 per year
Lower Profits Limit (LPL)	£12,570	£11,908 annualised LPL, as a result of mid-year adjustments shown below. From 6 April to 5 November 2022: £9,880 per year From 6 November 2022 to 5 April 2023 £12,570 per year
Upper Profits Limit (UPL)	£50,270	£50,270

Tax on dividends

The annual tax-free dividend allowance for the new tax year has been reduced from £2,000 to £1,000. As a result, limited company shareholders will pay more slightly more tax on dividend income from shares.

The table below outlines the rates for the current and previous tax years, in accordance with the Income Tax band(s) applicable to your annual earnings. These rates apply to taxpayers in England & Wales, Scotland, and Northern Ireland.

Whilst Income Tax in Scotland is different from the rest of the UK, dividend tax for Scottish taxpayers is worked out in accordance with Income Tax bands and thresholds that apply to the rest of the UK.

Tax band	2022-23	2022-23
Within Personal Allowance	0%	0%
Basic rate taxpayer	8.75%	8.75%
Higher rate taxpayer	33.75%	33.75%
Additional rate taxpayer	39.35%	39.35%

Employment Allowance

The annual Employment Allowance remains at £5,000 for the new tax year.

National Minimum Wage

On 1 April, the National Minimum Wage (NMW) was increased from £9.50 per hour to £10.42 per hour for workers aged 23 and over. Different hourly rates apply to those aged 21 to 22 years (£10.18), 18 to 20 years (£7.49), and under 18 years and apprentices (£5.28). 

If you pay any of your employees the minimum wage, you will need to make the necessary adjustments to your payroll to reflect the new higher rates of pay.

Statutory Pay for employees

On 2 April, statutory pay for parents increases from £156.66. per week to 172.48/week. This applies to Statutory Maternity, Paternity, Adoption, Shared Parental, Parental Bereavement Pay, and Maternity Allowance.  Maternity Allowance will change from £96.35 per week to £99.35 per week.

Statutory Sick Pay (SSP) will also increase from £99.35 per week to £109.40 per week. If you’re an employer, this is the minimum amount of sick pay that you must pay to eligible employees and workers. 

Value Added Tax (VAT)

VAT remains unchanged for the 2023-24 tax year, with the registration threshold staying at £85,000.

Thanks for reading

So, there you have it. We have covered the new tax year changes you need to know about for your business and personal tax. We hope you have found this post helpful. Please leave a comment if you have any questions.