From frequently asked questions to current developments.
From 1 April 2023 the rate of corporation tax on profits over £50,000 will rise to 25%. Companies with profits between £50,000 and £250,000 will be eligible for Marginal Relief. Companies with annual profits of £250,000 or more will be taxed at the full rate of 25%. The current rate of 19% will continue to apply, if your annual profits are at or below the £50,000 threshold.
If you have sources of income in addition to employment, tax will be calculated as part of the Self-Assessment return. Tax due for the 2022/23 tax year is due on 31 January 2024, the same day that your Self-Assessment return is due.
However, if you will have income from other sources in the 2023/24 tax year, you will need to make tax payments on account, these are based on the tax paid in the previous year. The first payment on account is also due on 31 January, the second payment is due 31 July.
A company pays dividends to shareholders from company profits. Dividends could be paid to you from your own company of which you are a shareholder, or any other company in which in you own shares. Either way, any dividends over the £1,000 annual dividend allowance is taxable.
Tax due on dividends depends on your income tax band as follows:
Income earned through employment is taxed at source, using a tax code. HMRC issues your employer with a tax code. The current tax code used for most people who work for one employer is 1257L. That means that £12,570 per year or £1,047.50 per month is tax free. Earnings above this and up to £37,700 is taxed at 20%. Earnings between £37,701 and £125,140 is taxed at 40%, with earnings above £125,140 at 45%. If you earn more than £125,140, then there is no personal allowance. If you have any income not taxed at source, the tax payable will be calculated as part of the Self-Assessment tax return.
If your annual turnover is over the £85,000 threshold, or you expect your turnover to be over this threshold in the next 30 days, you will need to register for VAT. You can also choose to register your business for VAT if your annual turnover is below this threshold. We can help you register for VAT and ensure that you remain compliant.
Salary sacrifice is a government-backed scheme designed to benefit both employers and employees by reducing tax. An employee gives up part of their salary in return for other benefits. The lower salary means a lower National Insurance contribution for both the employer and the employee.
Below are some types of salary sacrifice schemes:
- Company cars
- Childcare vouchers
- Pension contributions
- Cycling schemes
You will then save on tax and National Insurance deductions through salary sacrifice for the car. For electric cars, the benefit-in-kind tax rate will be 2% for the 2023-24 tax year. This means that you will only pay tax on 2% of the car's value.
You will save on tax and National Insurance deductions through salary sacrifice for the car. For electric cars, the benefit-in-kind tax rate will be 2% for the 2023-24 tax year. This means that you will only pay tax on 2% of the car's value.
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