As the 2022/23 financial year draws to a close, small businesses in the UK must prepare for a raft of changes that could have consequences for profit and growth.
In this guide, we outline some of the key changes for 2023/24 and how they might affect your business. We also suggest ways you can work with an accountant like CloudAccountant.co.uk to make the most out of the coming 12 months.
Corporation tax increase
From 1st April 2023, the corporation tax rate for profits over £50,000 will rise to 25%.
Smaller limited companies with profits between £50,000 and £250,000 can qualify for marginal rate relief to reduce their corporation tax bill. You can work with your accountant to maximise these marginal savings.
Energy Bills Discount Scheme
The Energy Bill Relief Scheme will be replaced by the less generous Energy Bills Discount Scheme (EBDS) from April.
The EBDS does not cap bills, but provides a per-unit discount on wholesale prices above £302/MWh for electricity and £107/MWh for gas.
This change means that energy costs could skyrocket for some businesses, putting them under serious financial pressure. You can work with your accountant to figure out how you will cope with these increased costs.
Full expensing and the annual investment allowance
Full expensing means that businesses investing in IT equipment and machinery will be able to claim back the cost against the tax on their profits.
This change could help businesses boost investment and may help offset the impact of the corporation tax increase. The annual investment allowance for all businesses will be permanently set at £1 million. For advice with your business investment strategy, speak to your accountant.
Capital gains tax annual exemption reduction
From 6th April 2023, the annual exemption on capital gains tax will fall to £6,000, and to £3,000 on 6th April 2024.
This change will affect individuals, sole traders, and partners who will begin paying capital gains tax on profits above £6,000 made from selling certain assets.
Dividend allowance reduction
The dividend allowance will fall to £1,000 on 6th April 2023 and to £500 on 6th April 2024.
This change will further affect limited company directors that pay themselves through dividends.
Top-rate income tax thresholds
The top rate of income tax will fall from £150,000 to £125,140. Income tax in Scotland will increase by 1% for the top two bands.
Invest in cloud accountancy in 2023/24
Navigating these rules and regulations can be a challenge for businesses. Find out how leveraging the power of cloud-based accountancy software like Xero and FreeAgent – together with support from a specialist accountant – can help you stay on top of financial management.
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