Tax Rates

*PA is withdrawn at £1 for every £2 by which ‘adjusted income’ exceeds £100,000. There is no allowance given above £125,140.

†The part of the PA that is transferable to a spouse or civil partner who is not a higher or additional rate taxpayer.

** If gross income exceeds this, the limit may be deducted instead of actual expenses.

BRB and additional rate threshold are increased by personal pension contributions (up to permitted limit) and Gift Aid donations.

General income (salary, pensions, business profits, rent) usually uses personal allowance, basic rate and higher rate bands before savings income (mainly interest). Scottish taxpayers are taxed at different rates on general income (see below).

To the extent that savings income falls in the first £5,000 of the basic rate band, it is taxed at nil rather than 20%.

The PSA taxes interest at nil, where it would otherwise be taxable at 20% or 40%.

Dividends are normally taxed as the ‘top slice’ of income. The DA taxes the first £500 (2023/24 £1,000) of dividend income at nil, rather than the rate that would otherwise apply.

Savings and dividend income are taxed at normal UK rates.

High Income Child Benefit Charge (HICBC)

1% of child benefit for each £200 (2023/24: £100) of adjusted net income between £60,000 and £80,000 (2023/24: £50,000 and £60,000).

Annual relievable pension inputs are the higher of earnings (capped at AA) or £3,600.

*Usually tapered down, to a minimum of £10,000, when adjusted income exceeds £260,000.

The maximum tax-free pension lump sum is £268,275, unless a higher amount is “protected”.

Class 1 (Employees)

*Nil rate of employer NIC on earnings up to £967pw for employees aged under 21, apprentices aged under 25 and ex-armed forces personnel in their first twelve months of civilian employment.

**Some businesses do not qualify, including certain sole director companies and employers who have an employer’s Class 1 NIC liability of £100,000 or more for 2023/24.

Employer contributions (at 13.8%) are also due on most taxable benefits (Class 1A) and on tax paid on an employee’s behalf under a PAYE settlement agreement (Class 1B).

Class 2 (Self employed)

Class 3 (Voluntary)

Class 4 (Self employed)

Employees with earnings above £123pw and the self-employed with profits over £6,725 (or who pay voluntary Class 2 contributions) can access entitlement to contributory benefits.

Cars

Taxable benefit: List price of car multiplied by chargeable percentage.

Then a further 1% for each 5g/km CO2 emissions, up to a maximum of 37%.

Diesel cars that are not RDE2 standard suffer a 4% supplement on the above figures but are still capped at 37%.

Vans

Chargeable value of £3,960 (2023/24: £3,960) if private use is more than home-to-work. Zero-emission vans charged at £Nil (2023/24: £Nil)

Fuel

Employer provides fuel for private motoring in an employer-owned:

Car: CO2-based percentage from above table multiplied by £27,800 (2023/24: £27,800).

Van: £757 (2023/24: £757).

Employee contributions do not reduce taxable figure unless all private fuel is paid for by the employee (in which case there is no benefit charge).

*BADR is available on qualifying gains up to a lifetime limit of £1 million.

*Taxable expenditure credit for qualifying R&D.

**Additional deduction for qualifying R&D

R&D-intensive companies are those that have R&D expenditure constituting at least 30% of total tax-deductible P&L expenses plus capitalised R&D costs. Loss-making R&D intensive companies can claim a payable credit rate of 14.5% from HMRC in exchange for their losses (capped at £20,000 plus 3 x [PAYE & NIC]).

Previously, most SMEs used the enhanced expenditure scheme, but with a payable tax credit rate for losses of 10% (or 14.5%, from 1 April 2023, for those with R&D expenditure constituting at least 40% of total expenditure).

Annual Tax on Enveloped Dwellings (ATED)

ATED applies to ‘high value’ residential properties owned via a corporate structure, unless the property is used for a qualifying purpose. The tax applies to properties valued at more than £500,000.

Stamp Duty Land Tax (SDLT), Land and Buildings Transaction Tax (LBTT) and Land Transaction Tax (LTT)

A supplement applies for all three taxes where an additional residential property interest is purchased for more than £40,000 (unless replacing a main residence). It is also payable by all corporate purchasers. The rate is 3% (SDLT), and 6% (LBTT) of the total purchase price. LTT has specific higher rates in bandings: up to 180k: 4%, 180 – 250k: 7.5%, 250 – 400k: 9%, 400 – 750k: 11.5%, 750-1,500k: 14%, >1,500k: 16%.

For SDLT:

– First-time buyers purchasing a property of up to £625,000 pay a nil rate on the first £425,000 of the purchase price.

– A 2% supplement applies where the property is bought by certain non-UK residents.

– A rate of 15% may apply to the total purchase price, where the property is valued above £500,000 and purchased by a ‘non-natural person’ (e.g. a company).

For LBTT, first-time buyer relief increases the nil rate band to £175,000.

Flat Rate Scheme (FRS)

If using FRS, the VAT paid by the business is a fixed percentage (based on business category) of ‘FRS turnover’ rather than the net of output tax over input tax. Input tax is usually not recoverable.

Cash accounting and Annual accounting schemes

*Up to 100% of the proportion of a deceased spouse’s/civil partner’s unused NRB and RNRB band may be claimed to increment the current NRB and RNRB when the survivor dies.

†RNRB is available for transfers on death of a main residence to (broadly) direct descendents. It tapers away at the rate of £1 for every £2 of estate value above £2m.

**Rate reduced to 36% if at least 10% of the relevant estate is left to charity. Unlimited exemption for transfers between spouses/civil partners, except if UK domiciled transferor and foreign domiciled transferee, where maximum exemption £325,000.

100% Business Property Relief (BPR) for all shareholdings in qualifying unquoted trading companies, qualifying unincorporated trading businesses and certain farmland/buildings.

Reduced tax charge on gifts within 7 years before death

Annual exemptions for lifetime gifts include £3,000 per donor and £250 per recipient.

Corporation tax is due 9 months and 1 day from the end of the accounting period, unless a ‘large’ company paying by quarterly instalments.

*A CGT return is due within 60 days of completion of sale of UK land and buildings by a non-resident and of sale of UK residential property with a tax liability by a UK resident. Any CGT payable is also due within 60 days.

*In 2023/24, the National Living Wage applied to those aged 23 and above.

You are advised to consult us before acting on any information contained herein.