Ascentis TV Special
The ATV Mini-Budget Special in September 2022 highlighted the tax changes announced in the recent mini-budget. The first change discussed was the corporation tax, which was set to increase from April 2023. However, this increase has been scrapped, and corporation tax will stay at 19% for all companies, regardless of profits, with no end date attached. The annual investment allowance, which provides tax relief for purchases of plant and machinery vehicles such as vans, was also set to reduce to £200,000 from April 2023. This reduction has also been scrapped, and the £1 million allowance will remain in place for the foreseeable future, with no end date attached.
On the other hand, the super allowances that provide capital allowances at 130% for new plant and machinery and vehicles are set to end on April 1, 2023, with no announcement of any extension. As for the income tax changes, the National Insurance rate increased by 1.25% for both employees and employers in April 2022, but it will be scrapped and go back to the previous rate on November 6, 2022. However, the uplifted thresholds remain unchanged. The employment allowance was also increased from £4,000 to £5,000, and this change is unaffected.
All of these changes mean that directors do not need to change their salaries, and previous advice remains unchanged. It is important to note that when producing P11Ds for the income tax year after April 5, 2023, there will be a slightly odd hybrid employers and I rate that applies to P11D benefits. For small business owners who take the majority of their remuneration as dividends, there was good news. The increase in dividend rates that mirrored the National Insurance change with 1.25% being added across the board has been reversed, and dividend tax rates will revert back to income tax rates of 7.5%, 32.5%, and 38.1% from April 6, 2023. The basic rate of tax will also be reduced from 20% to 19% from April 6, 2023, applying to any income that attracts the 20% income tax rate, including salaried earnings, rental income, and interest.
Overall, these changes mean that there is no need for significant changes for directors, and they can continue with their current salaries. However, businesses need to be aware of the changes in tax rates and allowances to ensure that they comply with the new regulations. It is also important to ensure that payroll software providers can implement changes within the short time frame given.
About Ascentis TV
Ascentis TV is our update show that gives business leaders updates and insights on various growth-related topics such as taxation, financial management, people management and much more. The show features our amazing experts from Ascentis who have many years of experience in helping businesses grow successfully and helping individuals achieve their personal vision of success.
You can find more Ascentis TV episodes and subscribe to our channel on our YouTube here.