MacKenzie Kerr have a wealth of experience in advising businesses and individuals in the Inverness area on a range of key tax and financial planning issues. Here we consider strategies to help you to minimise your tax bill, maximise your profitability and boost your wealth.
Although several statements were made during 2022, the budget on 15 March 2023 was the first full Budget since 27 October 2021.
The UK-wide personal allowance was frozen at £12,570 from 6 April 2021. The basic rate band threshold has also been frozen at £37,700. The personal allowance and thresholds are expected to remain at these levels until April 2028.
From 6 April 2023, the additional rate threshold decreases from £150,000 to £125,140. This means more individuals will start paying tax at the additional rate (45% on non-savings and savings income and 39.35% on dividend income).
There have been no changes to the rates of taxation on non-savings and savings income. The rates of taxation on dividend income for 2023/24 will remain at the increased levels introduced from 2022/23 of 8.75%, 33.75% and 39.35%.
Scottish taxpayers: income tax rates and bands for non-savings and non-dividend income are different from the rest of the UK. The freeze to the personal allowance impacts Scotland, although the freeze to the UK higher rate threshold only affects those with savings and dividend income.
National Insurance Contributions
The government announced the introduction of the Health and Social Care Levy (HSCL) in September 2021. For 2022/23 the levy was collected via an increase in certain National insurance contributions (NICs). The government repealed the introduction of the HSCL in October 2022. Accordingly NICs for 2023/24 will be calculated at the same rates as for 2021/22:
- 12% and 2% for Class 1 primary on earnings
- 13.8% for Class 1 secondary on earnings and Class 1A and 1B on benefits
- 9% and 2% for Class 4 on sole trader and partnership profits.
From July 2022, the NICs primary threshold and lower profits limit were increased to align with the personal allowance. As with the income tax thresholds, these are now frozen until April 2028. This means that both employees and the self-employed will be able to earn £12,570 before paying Class 1 primary or class 4 NICs. Self-employed individuals will continue to be able to benefit from accruing benefits without paying class 2 NICs where their profits are between £6,725 and £12,570.
The level of earnings at which employers will need to start paying Class 1 contributions has been frozen at the 2022/23 level of £9,100 until April 2028.
From 1 April 2023, the main rate of corporation tax increases to 25% where profits for an accounting period exceed £250,000. If a company has no associated company in the accounting period and its profits do not exceed £50,000, the small profits rate will be 19%. If a company has no associated company in the accounting period and its profits are between £50,001 and £250,000, a marginal rate will apply.
If a company has one or more associated companies in the accounting period then the limits are divided by the number of associated companies plus one. For an accounting period of less than 12 months the lower limit and the upper limit are proportionately reduced. There are a number of complex rules regarding associated companies.
Your financial planning strategy
In the face of ongoing change, it is more important than ever to have a robust business and personal financial planning strategy in place, to help ensure that you and your family are financially secure and on course to achieve your long-term goals.
If you're in the Inverness area and would like advice on tax planning strategies, please contact MacKenzie Kerr.