Tax changes for 2023: a round-up

Former Prime Minister Harold Wilson is supposed to have said, “A week is a long time in politics”. He probably didn’t, but the sentiment remains as relevant as ever. Over the last year, we’ve had three Prime Ministers, four Chancellors of the Exchequer, a mini-budget, an autumn statement and – last month – a full budget.

There’s also been a lot of financial chaos. Kwasi Kwarteng’s tax-cutting mini-budget spooked the markets and led to a £65 billion Bank of England intervention when the pound collapsed. Shortly afterwards, Jeremy Hunt’s Autumn Statement calmed the markets by reversing nearly all of Kwarteng’s changes. Then he upped the tax take further with his March 2023 budget.

Given this backdrop, it’s perfectly reasonable to not be up to speed with what the actual tax changes for 2023 actually are. In this post, we look at the key things that are changing for the 2023-24 tax year, plus some of the important things that are staying the same.

Income Tax

Income Tax bands are remaining the same, except for the additional rate band. Kwasi Kwarteng had planned to scrap the additional rate band, but was promptly forced into a U-turn. Jeremy Hunt has reduced the additional rate band from £150,000 to £125,140, effective from April 2023.

The rates for 2023-24 are therefore:

The personal allowance remains unchanged. As before, you do not get a personal allowance on taxable income over £125,140 (it also still goes down £1 for every £2 of income over £100,000 until it reaches £0).

While most Income Tax bands have not changed, inflation and wage increases will drag more people into higher and additional rate tax bands for the first time.

National Insurance

National Insurance rates remain unchanged from the Autumn Statement 2022. You can find a full breakdown of the rates on this page.

Corporation Tax

The Corporation Tax changes that were temporarily reversed by the mini-budget will come into force. In a nutshell, companies with taxable profits under £50,000 will continue to pay 19%. Those with profits over £250,000 will pay 25%. Those with profits between those two amounts will pay a tapered rate. You can find out more here.

Capital Gains Tax

From April 2023, the Capital Gains Tax annual exempt amount dropped from £12,300 to £6,000. It will drop further to £3,000 from April 2024. In this post, we look at the implications for buy-to-let landlords.

Stamp Duty

Changes to Stamp Duty are one of the few things to survive the 2022 mini-budget. Before 2023, you had to pay Stamp Duty when buying a property worth more than £125,000. This threshold is now £250,000. In addition, the threshold for first-time buyers has increased from £300,000 to £425,000. This relief used to be available on properties worth up to £500,000. It now applies to homes worth up to £625,000.

These changes only apply to England and Northern Ireland and they will remain in place until 31 March 2025.

You can find full details here.

State Pension

The State Pension rose 10.1% in April 2023. A full State Pension will now pay out £203.85 per week, up from £185.15. This increase is because of the ‘triple-lock’ guarantee.

Private Pensions

There were significant changes to the rules regarding private pensions in the 2023 Spring budget. The key ones were as follows:

• There is no longer a cap on the pension tax-free lifetime allowance. Before, if you had more than £1,073,100 in your pension, you’d pay 55% on the excess. Now you can have an unlimited amount in your pension, tax-free.
• You can now put £60,000 into your pension, tax-free, each year. This is up from £40,000.
• The money purchase annual allowance has changed. If you had started taking money from your pension pot, you could only pay £4,000 back into it tax-free in a year. This is now £10,000.

See our blog posts on these pension changes to learn how they allow you to extract business profits more tax-efficiently and how they could help reduce the amount you pay in Inheritance Tax.

Council Tax

Council Tax may rise more for some people. Before April 2023, councils could only raise the levy by up to 2.99% without holding a referendum. This has now increased to 3%, and if a council qualifies for the social care precept it can raise the tax by an additional 2%. This means some councils can raise Council Tax by up to 5% without having to consult residents.

Summary – tax changes for 2023

We hope you find this round-up of tax changes for 2023 useful. We’ve covered the main topics, but if you would like more detail on these and other changes, the government has published a full overview of tax legislation and rates. Of course, if you would like any tax planning advice, please get in touch and ask to speak to one of our accountants.