The 2023/2024 tax year introduces several changes to the tax landscape in the UK. The most notable areas which will be impacted include Capital Allowance claims, the exemption for Capital Gains Tax (CGT) and the introduction of a higher rate of Corporation Tax.
Capital allowances allow companies who fall within the charge to corporation tax an ability to claim tax relief on their plant and machinery expenditure.
The temporary implementation of the ‘super-deduction’, which allowed companies to exercise a 130% deduction against taxable profits for their main pool expenditure, expired at the end of 2022/23 tax year.
Instead, for qualifying expenditure incurred between 1st April 2023 and 31st March 2026, the rate has been replaced with an uncapped 100% first-year allowance for main pool expenditure, referred to as “full expensing”. The first-year allowance for special rate pool expenditure will remain at the rate of 50%. Also, the annual investment allowance will still be held at £1m.
Capital Gains Tax
This year the CGT exemption has been reduced from £12,300 to £6,000 and will fall further to £3,000 for the 2024/25 tax year. Therefore any “gains” earned over £6,000 for this tax year for higher-rate taxpayers will be taxed at the rate of 20% and 28% for second properties. For basic-rate taxpayers it will be 10% and 18% for second properties.
The CGT exemption will still be unable to be carried forward to the next tax year.
The major change to the 2023/24 taxation policy is found with the incorporation of a higher corporation tax rate band. The introduction of the main rate (MR) applies to non-ring-fenced profits at the rate of 25% for profits over £250,000. This is estimated to apply to around 10% of companies operating in the UK.
The previous rate of 19%, now the small profits rate (SPR), is applied to companies with profits up to £50,000. Companies with profits between £50,000 and £250,000 will pay tax at the main rate reduced by Marginal Relief which will provide a gradual increase in the effective Corporation Tax rate.
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