Businesses face an uncertain economic picture in 2024. One thing that is, however, certain is changes to the tax regime. Here are five taxes businesses will need to watch in 2023.
Corporation Tax increases
One of the few measures to remain following the Government’s disastrous September Budget is the planned increase in Corporation Tax rates. It will from 1 April 2023 increase from 19% to 25%. However, the current 19% rate will remain for businesses with profits of less than £50,000.
Businesses looking to make disposals of assets that will fall into corporation tax may wish to accelerate those plans and take advantage of the lower rates.
The end of the super deduction
The super deduction on capital allowances was introduced in 2021 to encourage businesses to invest. It effectively allows businesses to claim allowances of 130% on qualifying capital investment reducing corporate tax liabilities. That super allowance will end on 31 March 2023.
It is a valuable relief that can be applied to a wide range of assets from solar panels to plant and machinery. Businesses that are planning significant capital expenditure are encouraged to make that investment before the end of the tax year.
R&D tax relief
R&D tax relief has been a valuable relief for businesses across many industry sectors and three significant changes are on the way.
Firstly, the relief will from 31 March 2023 be extended to cloud computing and data activity, opening it to a much wider range of activity.
Secondly, activity will be restricted to UK activity, meaning costs incurred outside of the UK are unlikely to qualify.
And finally, expect a stronger anti-avoidance to counter exploitation of R&D tax credits.
Tax on dividends
Many business owners and directors choose to pay themselves via a combination of dividends and salary. They can expect to pay more tax as the tax-free dividend tax-free allowance falls.
Whilst the dividend tax rates remain unchanged, the tax-free allowance will be reduced from £2,000 to £1,000 in the tax year 2023/24 and to just £500 in the tax year 2023/24.
Business owners may wish to revisit the way they pay themselves to check it remains tax efficient.
Thirdly, the tax deduction enhancement available to R&D claims under the SME scheme has been reduced from 130% to 86%.
Goodbye CHIEF and hello CDS
Whilst not strictly a new tax, businesses that trade with EU customers will need to adopt the Government’s new Customs Declaration Service (CDS) platform.
Businesses importing goods into the UK stopped using the long-standing Customs Handling of Import and Export Freight, or CHIEF, platform in September 2022, yet it remains in place for those exporting goods to the EU.
That platform will cease on 31 March 2023 and move to the CDS platform. If they have not already done so, exporting businesses should prepare now for a seamless transition.
