If you’re a self-employed freelancer, contractor, consultant or small business owner, you’ll have been getting ready for the new Tax Year for a while now. Last month saw a strong Spring Budget announcement from the Chancellor, with a lot of the announcements affecting you and your business in some way.
One of the most important takeaways from the Spring budget, and great news for small businesses up and down the country, is that the UK is expected to avoid a technical recession in 2023.
With that in mind as we enter the new Tax Year from 6th April, being on top of any changes and understanding just how much tax you will need to pay when it comes to your self-assessment will help you manage your cash flow throughout the year. Keeping track of this through a Making Tax Digital compliant software, like FreeAgent, will help you be more aware of your incomings and outgoings.
Overall, the outlook for the UK economy in 2023-24 is definitely looking more positive, with the aim to half inflation, reduce debt and get the economy moving and the start of a new tax year can bring about some positive changes and benefits for individuals and businesses.
The 2023-2024 tax year begins on April 6th, and there are some significant changes that you should be aware of if you are self-employed or run a small business.
At Gorilla Accounting, we always want to make sure all of our clients know exactly where they stand when it comes to their finances.
Therefore, we have pulled together an at-a-glance guide for you to use during this New Tax Year. If you have any questions at all, please don’t hesitate in getting in touch with your dedicated accountant who can make sure you’re in the know…
Corporation Tax
The main rate of corporation tax is increasing to 25% from the 1st April 2023. However, this will only apply to companies who have profits of £250,000 or more.
Corporation tax will still be payable at 19% for any companies with profits of £50,000 or less and between the two thresholds (profits of £50,001 and £249,999) a marginal rate of corporation tax will apply at 26.5%.
This ensures that any companies generating profits between the two thresholds pay corporation tax at an effective rate that falls between 19% and 25%.
The above thresholds can also be reduced if you have any associated companies. Associated companies are defined as those under common control from a shareholding perspective.
Additional Rate Tax Threshold
The additional rate tax threshold is reducing from £150,000 to £125,140 which means individuals with total taxable income of £125,140 or more will pay income tax at the highest rate.
The personal allowance, basic rate tax band and tax rates remain unchanged, and these are fixed until April 2028 at the earliest (in total frozen for 6 tax years).
Dividend Tax Free Allowance
The dividend tax free allowance is reducing to £1,000 effective from the 6th April 2023 and this will reduce further to £500 effective from the 6th April 2024.
Pension Annual Allowance
Pension annual allowance is increasing from £40,000 to £60,000 and the lifetime allowance (currently £1,073,100) is being removed.
Tax Free Capital Gains
The tax-free capital gains allowance is set to reduce from £12,300 in the 2022/23 tax year to £6,000 effective from the 6th April 2023 and will reduce further to £3,000 effective from 6th April 2024.
Making Tax Digital with FreeAgent
If you are already signed up with Gorilla Accounting, you will know all about FreeAgent and how useful it is to use to manage your finances. When you’re a Gorilla client, you get all-inclusive use of FreeAgent as standard.
FreeAgent is fully Making Tax Digital compliant, the government’s way of adapting their tax systems to streamline the process and make it more efficient. It is aimed at making it easier for people and businesses to manage their taxes in the UK.
MTD was first introduced in 2015 as part of the government’s plan to make the UK’s tax system one of the most digitally advanced in the world. The initiative requires businesses to keep digital records of their accounts and file their tax returns online.
If you’re a business owner, you need to understand what MTD means for your company. Currently, VAT-registered businesses are required to comply with MTD regulations. This means keeping digital records of all transactions and submitting VAT returns online using compatible software.
By 2026, many self-employed individuals and landlords will be required to comply with MTD regulations.
New Tax Year, New Accountant
If you’re not already using Gorilla Accounting, switching is so easy.
We have an efficient switching process where we take care of everything for you, to ensure a smooth transition to Gorilla. We’ll deal with your previous accountant and get you up and running in no time. Switching to Gorilla couldn’t be any easier.
1) Simply get in touch with a member of our New Business team on 0330 107 9670 or request a call back here.
2) Complete our online application form
3) Give notice to your previous accountant and let them know you’re moving – we can do this on your behalf. We’ll obtain all relevant accounting records and information from your previous accountant.
We’ll set you up on FreeAgent and you’re ready to enjoy the Gorilla Accounting Service!
You can find out more about how the New Tax Year and the Spring Budget will affect you by watching our webinar with Mettle, the free business bank account by NatWest.
Here’s to a prosperous New Tax Year, from all at Gorilla Accounting.
