Feburary Tax Updates
I don’t know what else to say other than I have really missed taking the time to write this newsletter. Sitting down and writing our company newsletters was like writing to friends and telling them about things that can make their lives easier.
I can only apologise for being so quiet, and I promise to write more 😊
So here goes….
There are several changes that are coming in April 2023 which are important to plan for, as well as the usual tax planning considerations companies and individuals need to think about at the end of a tax year or financial year.
The minimum national living wage will increase from the 1st of April to £10.42
Please try and remember about this change, just in case it gets missed! If you have any questions or updates, please just let us know and we will gladly help.Corporation Tax Changes
Corporation tax rate will change from 19% to 25% from the 1st of April 2023 for companies that make a profit over £250 000. A small profits rate (SPR) has been introduced for companies with profits of £50,000 or less so that they will continue to pay Corporation Tax at 19%.What planning can I do to mitigate this increase in tax rate?
3. Capital Allowances
Another big change on the 1st of April 2023 is the end of the super deduction scheme which allowed a 130% tax deduction for qualifying plant and machinery to be deducted.
The annual investment allowance remains at £1 million for qualifying asset.
For companies with March year ends, qualifying expenditure before 1 April 2023 will qualify for 130% relief, but post 1 April will only be able to get 100% relief via AIA.
For companies that don’t have a March year end, 31 March 2023 will also be the last date they can claim the ‘Super Deduction’, but as the relief is being phased out, they will be entitled to a reduced rate depending on their year-end.
If a company wishes to accelerate the purchase for capital allowances purposes it will need to consider carefully the timing of capital expenditure, and where equipment is bought on HP, it must be brought into use by the year end.
It is worth thinking about your income and expenditures and if you are on a retainer with Anlo, please take the time and make an appointment to discuss any of the above as we don’t have that much time before these changes take effect 😊.
You can book an appointment with Annja right here!
4. CGT Changes
In November 2022, it was announced that the annual Capital Gains Tax exemption for individuals will change from £12300 per year to £6000. It will then be reduced to only £3,000 from April 2024.
The gain is basically calculated as the difference between the purchase price and the selling price. Any costs incurred in buying, selling or improving the property would reduce the gain.
The annual exemption is then deducted and from the 1st of April 2023, this exemption has decreased from £12300 to £6000. And will decrease even more ☹. The exemption applies to all capital assets sold, so it isn’t an exemption per asset.
You pay a different rate of tax on gains from residential property than you do on other assets.
Current Position
Changes from the 1st of April 2023
Another change is the reporting limit that is set at £50,000 now.
The CGT reporting proceeds limit is found in section 8C of the Taxes Management Act 1970. Amongst other things it requires persons who are within self-assessment to only complete the CGT pages where the total amount or value of the consideration for all ‘chargeable disposals’ of assets made by the person in the year exceeds four times the AEA. The limit is now set at £50,000.
What does this CGT exemption mean for us?
It means that if you are in property investment and want to make changes, you might need to think of selling properties sooner rather than later as you will pay more CGT from the 1st of April 2023.
Alternatively, you might take the view that because of this upcoming change, you might not want to sell your property after all and just wait to see if these changes persist.
It’s always possible that government policy here might change, or a change of government in the next year or two will overturn these changes 😊
The change also means more CGT will be payable on disposal of assets including shares and assets that have value.