Freezing income tax bands

It had already been announced that the income tax personal allowance (£12,570) and higher (40%) rate threshold (£50,270*) would be frozen until 5 April 2026, instead of increasing each year in line with inflation.

The Chancellor has now announced that these freezes will continue until 5 April 2028.

As earnings increase, this will result in more higher rate taxpayers and is often referred to as ‘fiscal drag’ because it will raise more tax without actually increasing income tax rates.

More to pay 45% income tax

The income level at which point the ‘additional’ 45% rate of income tax starts to apply will be reduced from £150,000 to £125,140* from 6 April 2023.

The new £125,140 threshold ties in with the £12,570 personal allowance being gradually withdrawn for those with income in excess of £100,000. For these individuals, once their income exceeds £125,140, they will no longer be entitled to a personal allowance and, from April 2023, will move straight into 45% income tax.

*It should be noted that, for Scottish taxpayers, income tax rates and thresholds are, for certain income types, separately set by the Scottish government.

Do you need further guidance on income tax? We offer a wide range of services which are unique to your business. Our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

Our fantastic team at A&C Chartered Accountants are here to help.

Undoing all measures announced since 23 September 2022, the income tax rates applicable to non-dividend income remain as they are now; namely a 20% basic rate, a 40% higher rate and a 45% additional rate (for those with income over £150,000).

For dividends, although the associated 1.25 percentage point supplement on NICs is being removed from 6 November, income tax rates on dividends will not be reduced. They will remain as they are now; namely a 8.75% basic rate, a 33.75% higher rate and a 39.35% additional rate. The first £2,000 of dividend income continues to be tax-free.

The upcoming Autumn Statement will need to be closely monitored to confirm income tax rates in 2023/24.

Impact on profit extraction

The corporation tax rate increases and the continuance of the higher income tax rates on dividends

will impact on the profit extraction strategies adopted by director/shareholders in 2023/24.

Again, this may be affected by the Autumn Statement on 17 November 2022 but please do contact us to discuss how the changes affect you.

Do you need further guidance on income tax rates? We offer a wide range of services which are unique to your businesses who are just getting going! Our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

Our fantastic team at A&C Chartered Accountants are here to help.

What are the Stamp Duty Land Tax changes?

On 23 September 2022, it was announced that the Stamp Duty Land Tax (SDLT) nil-rate threshold on residential property would be increased from £125,000 to £250,000.

Like the abolition of the 1.25 percentage point increase in NICs, the legislation to enact the SDLT change was already in progress when the U-turns were being made. As such, this threshold increase continues to apply.

What does it mean for you?

Unfortunately, the significant increases in mortgage interest rates mean the SDLT change is unlikely to provide the desired stimulus to the housing market.

The increase in the nil-rate threshold for first-time buyers, from £300,000 to £425,000, also continues to apply where first-time buyers purchase a property costing less than £625,000.

Do you need further guidance on the Stamp Duty Land Tax changes? We offer a wide range of services which are unique to your business. Our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

Our fantastic team at A&C Chartered Accountants are here to help.