Tax Update for 2023/2024
There are a number of tax changes and updates for the 2023/2024 tax year.
Here are the ones that apply to Limited Company Directors and Sole Traders;
Corporation Tax - the rate for profits of more than £250,000 will increase to 25% from April 2023. Profits below £50,000 remain at 19%. Profits between £50,000 and £250,000 will be tapered between 19% and 25%. (More information can be found here).
Dividend Tax - rates remain the same at 8.75% at the basic rate (earnings of £12,570 to £50,270), 33.75% at the higher rate (£50,270 to £125,000) and 39.35% at the additional rate (£125,140 and above). Note - the additional rate threshold has been reduced from £150,000 to £125,140.
Dividend Tax Free Allowance - the tax free dividend allowance will reduce from £2,000 per year to £1,000 per year from 23/24, it will then further be reduced to £500 from 24/25.
Personal Allowance - the allowance is frozen at £12,570 until 2025/2026. This also applies to the higher rate (£50,270) and additional rate thresholds (£125,140). The personal allowance is the amount of personal income (self-employment, dividends, rent, etc) that can be earned tax free.
Class 2 National Insurance (Sole Trader Income) - the class 2 NI threshold will increase by £210 to £6,725 for 2023/2024. Sole Trader profits above £6,725 will pay Class 2 NI of £3.15 per week.
Class 4 National Insurance (Sole Trader Income) - the class 4 NI threshold will increase by £2,340 to £11,908 for 2023/2024. The class 4 NI rate is 9.73% (2.73% for profits above £50,270).
Income Tax - rates remain the same at 20% (basic rate - £12,570 to £50,270), 40% (higher rate - £50,270 to £125,140), 45% (additional rate - £125,140 or more). Note - the personal allowance remains frozen (see above).
Class 1 National Insurance (PAYE employees / directors) - the employee threshold remains at £12,570 for the 2023/2024 tax year.
VAT - the mandatory VAT registration threshold will remain at £85,000 of VAT-able revenues for 2023/2024 (calculated on a rolling twelve monthly basis). This is planned to be frozen until 2025/2026.
Making Tax Digital for Income Tax (MTD for ITSA) - applies to self-employed sole traders and landlords with gross income of £10,000 per year or more from April 2024. Read more on MTD for ITSA here.