What’s changing for small businesses in the 2023/24 tax year?  

Here’s a quick rundown of the changes that may affect your business in the new tax year. 

Changes that came into effect on 1 April 2023 

• The Corporation Tax rate for profits over £50,000 rose to 25%. Limited companies with profits between £50,000 and £250,000 became eligible for Marginal Relief, which will reduce the company’s tax bill. Use HMRC’s calculator to estimate how much marginal relief your company can claim. 
• The Energy Bill Relief Scheme was replaced by the Energy Bills Discount Scheme. Under the new scheme, prices for businesses will no longer be capped. Instead, businesses will receive a per-unit discount on their prices when these rise above £302/MWh for electricity and £107/MWh for gas.  
• The super-deduction capital allowance was replaced by full expensing. Limited companies may be able to claim 100% of the cost of qualifying equipment against their taxable profits. Special rate expenses on assets that don’t qualify for full expensing may still be claimed at 50%.   
• The Annual Investment Allowance for all businesses was permanently set at £1m. 
• Research and development (R&D) relief will be extended. The changes mean that loss-making small businesses with R&D costs of at least 40% of their total expenditure will be able to claim credit of £27 for every £100 they spend on R&D.  

Changes that came into effect on 6 April 2023 

• The annual exemption on Capital Gains Tax dropped to £6,000 on 6 April 2023, and will drop to £3,000 on 6 April 2024. This means individuals, sole traders and partners will begin paying Capital Gains Tax on any profits above £6,000 made from selling certain assets between 6 April 2023 and 5 April 2024. Note that any unused exemption cannot be carried forward to the next tax year. 
• The dividend allowance dropped to £1,000 on 6 April 2023 and will drop to £500 on 6 April 2024. If you own shares in a limited company, you’ll pay 0% tax on the first £1,000 you earn in dividends in the 2023/24 tax year, with additional income from dividends taxed at a rate based on your overall income. As above, no allowance can be carried over to the new tax year. 
• The top Income Tax threshold dropped from £150,000 to £125,140. This means that anyone earning £125,140 and over will pay the additional rate (called the top rate in Scotland). 
• Income Tax rates in Scotland rose by 1% for the top two bands. From 6 April 2023, earnings at the higher rate between £43,663 and £125,140 will be taxed at 42%, and the top rate above £125,140 will be taxed at 47%, compared to rates of 40% and 45% in England, Wales and Northern Ireland. 

This article was originally published on the NatWest Business Insights website here.  

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