What the new financial year means for your business

With the start of a new financial year just around the corner, we’ve rounded up some key changes happening and which businesses will be affected.

National Living Wage

National Living Wage and minimum wage rates will be going up across the board, with some double-digit increases. These are set based on evidence presented to the Low Pay Commission.

Although they directly affect the lowest paid groups, increases often have a knock-on effect, pushing up other wages.

Source: Gov.co.uk

When will the new rules apply from?: 1 April 2023

Who will be affected?: Employers

Find out more on the government website about minimum wage rates.

Changes to dividend allowances

For company directors who pay themselves primarily in dividends, the squeeze continues. The dividend allowance will be halved from £2,000 to £1,000, but with no change to rates.

When do the new rules apply? 6 April 2023

Who will be affected? Limited company directors

Find out more: capital gains and dividends tax changes in the 2022 autumn statement

Tax rates

In the Autumn statement, Jeremy Hunt announced the threshold at which people pay the additional rate of income tax, charged at 45%, will be lowered from £150,000 to those earning over £125,140.

The change will mean 250,000 extra workers will pay tax at the highest rate.

The income tax personal allowance, higher rate threshold and main national insurance thresholds have been frozen until April 2028.

There are different rates for workers based in Scotland.

When do the new rules apply? 6 April 2023

Who will be affected? Higher earners will be impacted by the change to thresholds

Find out more: Jeremy Hunt’s Spring Budget 2023 - what does it mean for your money

Scottish Budget - what does it mean for your money?

Tax allowances for investment

There was potential good news for those traders established as companies from a generous change to capital allowances.

Jeremy Hunt announced a new policy of ‘full capital expensing’ that means every pound invested in qualifying plant and machinery can be deducted immediately from profits. This allowance will last for the next three years.

Full expensing is available to companies subject to corporation tax only. Unincorporated businesses cannot claim under this scheme but already have access to the Annual Investment Allowance (AIA), which allows them to claim 100% of the cost of plant and machinery up to £1m in the year it is incurred.

The plant and machinery purchasable under the freshly announced scheme must be new and unused. It must not be a car and must not be given to the company as a gift or bought to lease to someone else.

Qualifying investments for full expensing include:

• machines such as computers, printers, lathes and planers
• office equipment such as desks and chairs
• vehicles such as vans, lorries and tractors (but not cars)
• warehousing equipment such as forklift trucks, pallet trucks, shelving and stackers
• tools such as ladders and drills
• construction equipment such as excavators, compactors, and bulldozers
• some fixtures such as kitchen and bathroom fittings and fire alarm systems in non-residential property.

Limited company traders needing new equipment and vehicles now could benefit from this. It may also be worth considering bringing forward planned upgrades to take advantage of this temporary tax change. Remember, it only lasts for three years.

Find out more in the Spring Budget 2023 report from the government's website.

When do the new rules apply? 1 April 2023

Who will be affected? Limited companies

Find out more: self-employed vs limited companies

Employment costs

In addition, there are some increases in other employment costs and many traders will need to note:

Statutory maternity, paternity, adoption, shared parental leave and parental bereavement will rise to £172.48 from £156.66, or 90% of the employee’s wages - whatever is lower.
Statutory sick page (SSP) will rise from £99.35 a week to £109.40.

When do the new rules apply? 1 April 2023

Who will be affected? Employers

Pension allowances

One of the Spring Budget announcements that garnered a lot of publicity was lifting the pension lifetime allowance.

This was a cap on the maximum lifetime amount that taxpayers can put into their pension without being taxed.

Under existing rules, savers can accumulate up to £1.073m over their lifetime before tax charges kick in, but this cap – known as the lifetime allowance – is to be abolished.

Meanwhile, the maximum you can save into a pension in a single year while still benefiting from tax relief (known as the 'annual allowance') will be increased from £40,000 to £60,000 from April 2023.
Previous cuts to these allowances had been blamed for higher earners – in particular senior NHS doctors – retiring early to avoid large tax bills.

It would be worth seeking financial advice before acting on this but it could help some traders access pension funds tax-free while carrying on working.

When do the new rules apply? 6 April 2023

Who will be affected? High earner/part-retirees

Find out more: Reforms to pension tax rules set to give savers a boost

Fuel

The Chancellor continued the freeze on fuel duty, which will help prevent further fuel price increases in these tough times.

When do the new rules apply? Existing rates will continue

Who will be affected? Drivers

Find out more: fuel duty remains frozen

Corporation tax increase

For businesses with profits exceeding £250,000 the main rate of corporation tax will increase to 25% from April 2023. But companies with profits of less than £50,000 will continue to pay the current rate of 19%.

When do the new rules apply? 1 April 2023

Who will be affected? Limited companies with profits exceeding £250,000.