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5 key changes for the 2023/24 tax year

19th Apr 2023
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A new tax year is upon us, and with it comes a set of new rates and changes. We’re providing the low-down on some key changes that are worth bearing in mind this financial year.

5 key changes for the 2023/24 tax year | Futrli by Sage | Image of an alarm clock with the words tax time on it
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Some of these changes are hard to miss, like the increase to the main rate of corporation tax, the reduction of the additional-rate threshold for income tax, and the removal of the pensions lifetime allowance.

Others might not be as obvious to your clients, either because they were hidden in Budget documentation or announced as policy U-turns. 

Either way, the start of 2023/24 is a great time to talk to your clients about the changes they might have missed, so they can take advantage of any new opportunities, and avoid getting caught out by new requirements.

 

Relief on business investment

With the previous super deduction coming to an end as of 31 March 2023, a new scheme is now in place: full expensing.

This provides companies 100% first-year relief on qualifying plant and machinery between 1 April 2023 and 31 March 2026 – a slightly less generous offer than the 130% super deduction, but still not to be missed for businesses investing in new equipment.

The Government has also extended the 50% first-year allowance that was due to end alongside the super deduction, so this also applies until 2026.

This allowance can be claimed on special-rate expenditure, which doesn’t qualify for full expensing.

 

Payroll and NICs

Various changes for PAYE and payroll take effect this tax year, including:

National Insurance rates and thresholds have remained at the levels set in November 2022, but it’s worth noting that directors will see a blended rate for the 2022/23 tax year due to changes to these rates.

R&D relief changes

Changes to the two tax relief schemes for research and development have taken effect from 1 April 2023, with available relief decreasing for the SME R&D scheme, and increasing for the RDEC.

Companies that are classed as ‘R&D intensive’ will, however, be able to benefit from the original rates of the SME scheme.

New requirements for claims are also taking effect this year – and their introduction has been accelerated.

Businesses will be required to provide extra information, including details on their qualifying expenditure and descriptions of their R&D work, as part of their claim.

This new requirement was originally set to apply to claims for accounting periods starting on or after 1 April 2023, but has been brought forward to all claims submitted from 1 August 2023.

Schedule a personalised demo of Futrli by Sage here

Pension tax changes

Previously standing at £1,073,100, the pensions lifetime allowance has now been scrapped altogether. A detail hidden in the Budget documentation, however, was a change to the maximum tax-free amount that can be taken as a pension lump sum. 

Before 2023/24, savers could take up to 25% of their pension tax-free as a lump sum, capped at 25% of their available lifetime allowance.

Now that the lifetime allowance has been removed, a new maximum cap of £268,275 (25% of £1,073,100) has been introduced. 

It remains to be seen whether this maximum will be raised in line with inflation in future years, but if it isn’t – or if it’s decreased instead – this could start to erode the amount savers can put away. 

The annual allowance has also been increased from £40,000 to £60,000, and a few additional adjustments are taking place in line with this change:

  • the adjusted income threshold for the annual allowance taper has risen from £240,000 to £260,000
  • the minimum annual allowance someone can have as a result of the taper has increased from £4,000 to £10,000
  • the money purchase annual allowance has increased by the same amount, from £4,000 to £10,000.

 

Tax year basis transition

Finally, a change that’s been in the works for some time now: the move to the tax year basis. 

From April 2024, sole traders and partnerships will need to adjust to new rules on their basis period, paying income tax on their profits made in the tax year, rather than in their accounting period.

The 2023/24 tax year is a transition period for the change. Businesses with an accounting period ending on dates other than 31 March or 5 April will be taxed on their profits up to the end of their accounting period, plus their profits up to the end of the tax year.

They’ll be able to claim overlap relief to balance out the costs, but the change could still result in temporarily higher tax rates and extra administrative work. 

For some clients, it might be a good idea to change their accounting date – but that’s a choice you’ll be able to help them with.

 

Discussing changes in tax is a great way to open a dialogue with your clients about their needs, worries, and hopes for the financial year ahead. It can be an opportunity to let them know how you can support them in their goals. If you are looking to expand your advisory offerings, Futrli is the ultimate advisory solution for accountants.

We provide users with powerful predictions to inform business decisions for both accountants and their clients. By synchronizing with clients' ledgers, thousands of algorithms process financial data, generating three-year cash flow forecasts. 

Check out how Futrli may be able to help your firm achieve its 2023 advisory goals here.

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