Intuit QuickBooks Small Business Index, December 2024
TAX AND PENSIONS
New Tax Year (2023/24) Guide
The 2023/24 new tax year starts on 6th April 2023 until 5th April 2024.
This article breaks down the ins and outs of the new tax year for individuals and businesses, including the key changes, so you can feel confident stepping into the new financial year.
Table of contents
Please note everything in this article is for your information. QuickBooks always recommends speaking to your accountant for any financial advice.
Thresholds and allowances: 2023/24 tax year
Personal allowance, sometimes referred to as ‘tax-free allowance’, is the amount you’re allowed to earn in a given tax year before you start paying income tax.
Personal Allowance for 2023/24 tax year remains at £12,570. This is frozen until 2026.
The Higher Rate of Income tax threshold for 2023/24 is £50,270. This is also frozen until 2026.
The Income Tax additional rate threshold for 2023/23 is now £125,140. This is the threshold at which you will not have any Personal Allowance, because £1 of the Personal Allowance is withdrawn for every £2 of income above £100,000.
The Income Tax thresholds might impact how you want to be paid if you run a Director Only business. Read our article on Payroll for Director Only businesses and chat to your accountant for advice. You can also skip to information on Dividend Allowance and tax rates for 2023/24.
UK income tax rates and bands (excluding Scotland)
This table shows the bands and tax rates for 2023/24, compared to the 2022/23 tax year. It assumes you have a standard Personal Allowance of £12,570.
Please be aware that there are different tax rates for Scottish residents.
Band | Tax rate | Taxable income (2022/23) | Taxable income (2023/24) |
|---|---|---|---|
Personal allowance | 0% | Up to £12,570 | Up to £12,570 |
Basic rate | 20% | £12,571 to £50,270 | £12,571 to £50,270 |
Higher rate | 40% | £50,271 to £150,000 | £50,271 to £125,140 |
Additional rate | 45% | Over £150,000 | Over £125,140 |
Please refer to the gov.uk income tax rates information.
Additional rate tax band threshold 2023/24 now covers incomes over £125,140
Scottish income tax rates and bands
Residents of Scotland have different tax rates and bands to the rest of the UK.
Scottish Personal Allowance for 2023/24 tax year remains at £12,570.
The Scottish Top Rate of Income Tax threshold for 2023/24 is now £125,140 (reduced from £150,000 in the 2022/23 tax year).
This table shows the bands and tax rates for Scotland for 2023/24, compared to the 2022/23 tax year. It assumes you have a standard Personal Allowance of £12,570 - if you earn more than £100,000, your Personal Allowance is reduced by £1 for every £2 earned over £100,000.
Band | Tax rate (2022/23) | Tax rate (2023/24) | Taxable income (2022/23) | Taxable income (2023/24) |
|---|---|---|---|---|
Personal Allowance | 0% | 0% | Up to £12,570 | Up to £12,570 |
Starter rate | 19% | 19% | £12,571 to £14,732 | £12,571 to £14,732 |
Basic rate | 20% | 20% | £14,733 to £25,688 | £14,733 to £25,688 |
Intermediate rate | 21% | 21% | £25,689 to £43,662 | £25,689 to £43,662 |
Higher rate | 41% | 42% | £43,663 to £150,000 | £43,663 to £125,140 |
Top rate | 46% | 47% | Over £150,000 | Over £125,140 |
National insurance thresholds
The UK National Insurance threshold is £12,570 for a year for employees and self-employed workers.
The most common National Insurance rate is 12% for the 2023/24 tax year.
Corporation tax
Every limited company must file and pay corporation tax (or report that have nothing to pay if applicable).
In the new tax year (2023/24), the main UK corporation tax rate is 25%.
This affects companies with profits of £250,000 or more – applying to all profits. It’s an increase from 19% in the previous financial year (22/23).
Companies with profits of £50,000 or less use the Small Profits Rate of 19%.
If the company has profits between £50,000 and £250,000, there is a tapered rate.
If you’re a small business, QuickBooks accounting software is here to make keeping track of your finances simple and easy to understand.
National Living Wage 2023
National Living Wage and National Minimum Wage are not technically part of the new tax year changes, but it might impact how you pay your employees over this new tax year - and therefore have an impact on your taxes and payroll accounting.
The National Living Wage will increase to £10.42 for those aged 23+ from 1st April 2023.
There are also changes to the National Minimum Wage for those aged 22 and under, and apprentices:
Age (years) | From April 2022 | From April 2023 |
|---|---|---|
23 and over | £9.50 | £10.42 |
21-22 | £9.18 | £10.18 |
18-20 | £6.83 | £7.49 |
Under 18 | £4.81 | £5.28 |
Apprentices* | £4.81 | £5.28 |
* Apprentices aged <19 or aged 19+ in their first year of apprenticeship. Once an apprentice is over 19 and has completed their first year of their apprenticeship, they are entitled to the minimum wage for their age group.
Pensions from April 2023/24
Workplace pensions
The total amount of employer and employee contributions into your employee’s auto-enrolment workplace pension remains at a minimum of 8% of the employee’s qualifying earnings. The employer must contribute at least 3%.
The new tax year (2023/24) will see no changes to the minimum amount you need to pay into your employee’s auto-enrolment workplace pension.
State pensions
There are some changes to state pensions from April 2023. However, this doesn’t affect what pension you pay to your employees. If you are an employee, this doesn’t affect your pension contributions.
State pension is claimed from the government when an individual reaches state pension age.
Find out more about state pensions from Citizen’s Advice.
State pensions do not affect your payroll so it’s not a feature in QuickBooks’ payroll software.
Personal pensions
In the 2023/24 tax year, your annual allowance - the tax-free amount you can pay into a personal pension - is £60,000 (or an amount equal to your annual salary if this is lower).
The Chancellor has removed the lifetime allowance on pensions from 6th April 2023, meaning the amount an individual can accumulate in their pension pot before paying additional tax is no longer applicable.
Personal pensions are arranged and managed by an individual, so don’t affect your payroll as an employer. Therefore, it’s not a feature in QuickBooks’ payroll software.
Student loans in the new tax year
Student loan payments may affect your payroll in the new tax year.
Ensure that you have a record of what type of student loan any employees on your payroll have, so you can make the correct deductions in line with the new thresholds (below).
If you’re a director with a student loan, and you’re being paid salary and dividends from your company, bear in mind that the threshold for repayment is based on your total income.
QuickBooks payroll software can make calculating student loan repayments easy for you as an employer (or if you run a director only company).
Changes to student loan thresholds 2023/24
There are no rate changes, but the repayment threshold for some Plans has been changed:
For the 2023/24 tax year, the repayment threshold for pre-2012 (Plan 1) loans is £22,015. This has increased from £20,195.
The threshold for post-2012 (Plan 2) loans is £27,295. This has not changed.
Post-graduate repayment threshold for 2023/24 is £21,000.
The threshold for Plan 4 student loans (for Scottish citizens) in the 2023/24 tax year is £27,660. This has increased from £25,375.
There are plans to introduce a new Plan Type 5 student loan in the future, but this will not come into effect during this 2023/2024 tax year.
Company cars
The simplest way to calculate the taxable value of company cars and fuel is using commercial payroll software. The taxable value varies according to the car’s fuel type, any ‘downtime’ during the tax year, and CO2 emissions - it is not the same as the value of the car.
*Please note, this feature is only available in our advanced payroll software.
As an employer, you need to pay tax on company cars and/or fuel that you supply to your employees.
If you have a company car as a benefit from your job, which you can use privately (outside of work), you will have to pay Benefit in Kind (BiK) tax. This is usually calculated during payroll.
Benefit in kind tax on company cars in 2023/24
Benefit in Kind (BiK) rates have been frozen since 2022/23 tax year. The 2023/24 BiK rates are the same as last year. They are due to stay at this rate until 2025.
Percentage BiK rates are the percentage of the vehicle’s P11D Value (its list price).
BiK Rates table
This table uses WLTP figures to show BiK rates from conventional fuel (Electric, Petrol, RDE2 Diesel) for cars registered after April 2020, according to the vehicle’s emissions.
CO2 emissions (g/km) | BiK Rate |
|---|---|
0 | 2% |
1-50 (electric range >130 miles)* | 2% |
1-50 (electric range 70-129 miles)* | 5% |
1-50 (electric range 40-69 miles)* | 8% |
1-50 (electric range 30-39 miles)* | 12% |
1-50 (electric range <30 miles)* | 14% |
51-54 | 15% |
55-59 | 16% |
60-64 | 17% |
65-69 | 18% |
70-74 | 19% |
75-79 | 20% |
80-84 | 21% |
85-89 | 22% |
90-94 | 23% |
95-99 | 24% |
100-104 | 25% |
105-109 | 26% |
110-114 | 27% |
115-119 | 28% |
120-124 | 29% |
125-129 | 30% |
130-134 | 31% |
135-139 | 32% |
140-144 | 33% |
145-149 | 34% |
150-154 | 35% |
155-159 | 36% |
>159 |
* Referring to the range of an electric vehicle
The tax your employee pays on their company car is then calculated: P11D value x BiK rate x employee’s tax band.
Company car fuel benefit
If you provide your employee with fuel for personal use, as well as the car itself, they will have to pay a car fuel benefit.
This is calculated based on the car’s BiK percentage multiplied with the current tax year’s multiplier.
The 2023/24 tax year multiplier for car fuel benefit is £27,800. This has increased from £25,300 in the previous tax year.
So if your employees company car BiK rate is 23% (as its emissions are 90-94 g/km) and they fall in the 20% tax rate bracket. They will have to pay approximately £1164 in car fuel benefit tax (0.23 x 25,300 x 0.2).
Sound complicated? Use QuickBooks advanced payroll software to automate calculations into your employees payroll.
BiK on company vans & fuel
The BiK paid on company vans in the 2023/24 tax year is £3,960. (Increased from £3,600 in the tax year 2023/23.)
This can be reduced if:
your employee cannot use the van for 30 days (or more) in a row
your employee pays you to privately use the van
other employees use the van - divide £3,600 by the number of employees
BiK on van fuel (fuel used for private journeys) in the 2023/24 tax year is £757. (An increase from £688 in 22/23.)
This can be reduced if:
the employee cannot use the van for 30 days (or more) in a row
your employee pays you back for all their private fuel
you stopped providing fuel during the tax year
Other personal allowances and tax reliefs
Personal Savings Allowance
Personal Savings Allowance is the amount your savings account can earn in tax-free interest each tax year.
In the new tax year, 2023/24, basic rate taxpayers can earn up to £1000 tax-free interest.
Tax band | Tax free savings interest |
|---|---|
Basic Rate (20%) | £1000 |
Higher Rate (40%) | £500 |
Additional Rate (45%) | £0 |
Remember if you are a Scottish resident, tax bands are different.
ISAs
ISAs and other tax-free savings accounts do not count towards your Personal Savings Allowance (above).
In the 2023/24 tax year, the maximum you can put into ISAs is £20,000.
This has remained the same since the 2017/18 tax year.
There are 4 types of ISA - you can put money into one of each type each tax year but the total must not exceed the maximum £20,000:
cash ISAs
stocks and shares ISAs
innovative finance ISAs
Lifetime ISAs
Dividend tax allowance
You do not pay tax on any dividend income that falls within your Personal Allowance. You then also get a tax-free dividend tax allowance - you only pay tax on dividends exceeding this amount.
The tax-free Dividend Allowance for 2023/24 is £1000.
The allowance has decreased from £2000 in the previous tax year (22/23) and is set to decrease to £500 in the 2024/25 tax year.
2023/24 Dividends Tax Rate
Your Dividend tax rate in the new tax year (2023/24) is dependent upon your tax band:
Tax band | 2023/24 threshold | Dividend tax rate |
|---|---|---|
Personal allowance | Up to £12,570 | 0% |
Basic rate | £12,571 to £50,270 | 8.75% |
Higher rate | £50,271 to £125,140 | 33.75% |
Additional rate | Over £125,140 | 39.35% |
UK capital gains tax rates
The UK capital gains tax allowance is £6,000 for the 2023/24 tax year.
This is for individuals and personal representatives. It is different for trustees.
In the previous tax year it was £12,300 and is expected to decrease to £3,000 in the following (2024/25) tax year.
The Capital Gains Tax (CGT) rates have not changed for 2023/24:
Tax band | Rate on gains from residential property | Rate on other chargeable assets |
|---|---|---|
Basic rate | 18%* | 10%* |
Higher and additional rates | 24% | 20% |
* This rate depends on your total taxable gains, your taxable allowance and how much taxable income you have (minus your Personal Allowance) as follows: total taxable gains - tax-free allowance + taxable income. If the total is still within the basic income band this rate applies. If the total is more, then your rate will match the higher/additional rates.
Find out more: https://www.gov.uk/capital-gains-tax/rates
Business Asset Disposal Relief (Entrepreneurs’ relief)
The previous ‘Entrepreneurs’ relief’ is now known as Business Asset Disposal Relief (since April 2020).
Qualifying individuals pay less Capital Gains Tax when selling all or part of their business.
Business Asset Disposal Relief in 2023/24 means you pay 10% Capital Gains Tax (CGT) on qualifying assets - rather than the standard rate (above).
For more information on if you qualify for Business Asset Disposal Relief visit: https://www.gov.uk/business-asset-disposal-relief
Inheritance tax
In the new tax year (2023/24), estates worth £325,000 or less are tax free.
The tax rate on estates worth more than £325,000 is 40%. This has not changed since the previous tax year and is frozen until 2026.
Preparation and filing of inheritance tax is not included in QuickBooks products.
Need support?
QuickBooks’ accounting software is designed to help sole traders and limited companies stay in control of their finances. We help to automate payroll, keep track of expenses and ensure you can be Making Tax Digital compliant with your tax returns.
All information in this article is correct as of 14/02/23 - please always refer to government guidance and the advice of your accountant before making any financial decisions.
The information on this website is provided free of charge and is intended to be helpful to a wide range of businesses. Because of its general nature the information cannot be taken as comprehensive and they do not constitute and should never be used as a substitute for legal, accounting, tax or professional advice. We cannot guarantee that the information applies to the individual circumstances of your business. Despite our best efforts it is possible that some information may be out of date. Any reliance you place on information found on this site or linked to on other websites will be at your own risk.
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