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Tax rates & Facts
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Tax Facts 2023-24
Welcome to the 2023-24 Spring Budget Tax Facts
These pages are prepared for guidance only. We recommend that you contact us for advice before acting on any information contained in the document and we cannot accept responsibility for any action taken without such advice.
|Lifetime Allowance (LTA)
|Annual Allowance (AA) - maximum
|Annual Allowance - minimum
|Money Purchase Annual Allowance (MPAA)
- Tax relief is generally obtained on pension contributions in one of three ways:
- Under “net pay arrangements” i.e. contributions come out of gross pay;
- By “relief at source” (RAS) i.e. contributions are made net of basic rate tax (which the fund claims back from HMRC);
- Salary sacrifice (see note 14).
- Tax relief at the taxpayer’s marginal income tax rate is given on the individual’s pension contributions up to 100% of earnings, capped by the AA.
- Those with little or no UK relevant earnings can make pension contributions up to £3,600 gross (£2,880 net) per year.
- AA can be increased by unused allowance brought forward from the previous three tax years.
- AA is usually tapered down by £1 for every £2 of adjusted income over £260,000 (2022/23: £240,000), to a minimum of £10,000 (2022/23: £4,000).
- Annual allowance charge (for pension inputs exceeding the annual allowance) is levied at the individual’s highest marginal tax rate.
- Employers can contribute to the employee’s pension fund up to the AA per year, less any contributions made by the individual. Employer will enjoy tax relief on those contributions under the normal rules for business expenses.
- Investors in personal and other defined contribution pension schemes can currently access all of their pension savings once they reach age 55.
- When the investor takes benefits from such pension schemes under flexiaccess drawdown, up to 25% of the accumulated fund can be drawn as a tax-free lump sum. The balance is taxed at the investor’s marginal rate of tax that applies in the year those benefits are drawn.
- LTA is measured against the capital value of the pension benefits at the time they are first taken and on certain other occasions.
- Until 5 April 2023, LTA charge is 55% if funds exceeding the LA are taken as a lump sum, or 25% if the benefits are taken as income.
- For 2023/24, the LTA charge is abolished, but the maximum tax-free pension commencement lump sum remains capped at 25% of LTA (i.e. £268,275).
- MPAA replaces AA where taxpayer has started to take taxable income from a defined contribution scheme (other than via an annuity) and has further pension inputs. There is no carry forward of unused MPAA.
- Salary sacrifice for pension contributions is very tax-efficient. An employee agrees to give up some of their salary in exchange for pension contributions by the employer, which are are exempt from income tax and National Insurance.
- The amount that must be paid to the employee for National Minimum Wage (NMW) purposes will be the post salary sacrifice amount, so a salary sacrifice can’t generally take an employee below the NMW. There is an exception where an employee is provided with work-related accommodation under a salary sacrifice arrangement.
- The post-salary sacrifice amount will apply for all tax, NIC and benefits purposes, including tax credits, pension net relevant earnings and statutory redundancy.
- ‘Auto enrolment’ (AE) makes it a legal requirement for all employers to automatically enrol their eligible employees into a workplace pension and make contributions to that pension.
- Under AE, the total minimum contribution is 8% of salary, of which the employer must fund a minimum of 3% of salary.
- Employees can opt out of AE but those that do will need to be re-enrolled every three years.
- Self-invested Personal Pensions (SIPPs) are a form of personal pension fund that can invest in a wider range of assets than other pension funds, where the investment is restricted to insurance-backed funds.
- In particular, the permitted investments include direct holdings of quoted investments and commercial property. The latter is often owned by SIPPs of business owners, with the property being rented to the business as premises from which to operate. The rental payments are tax-deductible for the business and tax-exempt receipts for the SIPP.
- Unlike other pension schemes, SIPPs are allowed to take on debt. They can (broadly) borrow up to 50% of their net asset value to invest in permitted investments.
|Maximum amount per week
|Old state pension
|New state pension
- An individual is eligible to draw the state retirement pension when he or she reaches State Pension Age (SPA). State Pension age is increasing for both men and women; it will be 66 by October 2020. Thereafter, it will gradually increase to 68.
- Individuals who reach SPA after 5 April 2016 receive the new state pension, which replaced the old state pension, the second state pension and pension credit.
- An individual who qualifies for the state pension may choose to defer claiming it. Any deferred pension will be paid at a higher rate than the normal pension.
- The state pension is taxable.
|Annual investment limits
|Individual Savings Account (ISA)
|– Overall limit
|– Lifetime ISA (LISA)
|– Junior ISA
|Enterprise Investment Scheme (EIS)
|Seed EIS (SEIS)
|Venture Capital Trust (VCT)
- ISA investors can invest in any combination of cash or shares, up to the overall limits shown. The £4,000 LISA limit is part of the general ISA limit of £20,000, not additional to it.
- Taxpayers aged between 18 and 40 may open a LISA and invest up to £4,000 each year, which qualifies for a 25% Government bonus on amounts invested up to the age of 50.
- This benefit is retained as long as the money is either
- put towards a first home costing up to £450,000, or
- kept in the account until reaching age 60, or
- withdrawn after being diagnosed with a terminal illness when having less than 12 months to live.
- If the money in a LISA is withdrawn in other circumstances, the bonus is clawed back, with an additional 5% charge (i.e. total charge of 25% of amount withdrawn).
- Junior ISAs are available to those aged under 18 and who don’t have a Child Trust Fund account. At age 18, their junior ISA becomes an adult ISA.
- EIS and VCT investments attract 30% Income Tax relief, but those schemes all have different qualifying rules.
- SEIS investments attract 50% Income Tax relief.
- Where the disposal proceeds from any capital gain are reinvested under EIS in the four-year period that starts one year before the date of the gain, all or part of the original gain can be deferred.
- Gains reinvested under SEIS, within the same tax year, up to the investment limit attract 50% exemption from CGT.
- Investments made under EIS and SEIS can be carried back to be treated as made in the previous tax year, subject to the investment limits.
- Gains on disposals of investments acquired under EIS and SEIS are exempt from CGT if investment conditions have not been broken. Disposals of VCT shares are exempt CGT (i.e. no gain or loss arises).
- Dividends from investments in VCTs do not attract income tax provided the original investment was made within the permitted maximum of £200,000 per year. Dividends received from EIS and SEIS schemes are taxable as normal.
Employer-provided car benefit
Cars: Taxable benefit: List price multiplied by chargeable percentage
|2023/24 & 2022/23
|70 - 129
|40 - 69
|30 - 39
Then a further 1% for each 5g/km CO2 emissions, up to a maximum of 37%.
- The employee is taxed on the ‘cash equivalent’, calculated as a percentage (see table) of the vehicle’s chargeable value.
- Chargeable value is the list price when new, plus the cost of most accessories added, less any capital contribution (up to £5,000) by the employee.
- The employer must pay Class 1A NIC at 13.80% (2022/23: 14.53%) on the benefit.
- Diesel cars (with some exceptions, including cars featuring 48V mild-hybrid technology) suffer a 4% supplement on the table's figures, but are still capped at 37%.
Car fuel benefit
- Where fuel is provided by the employer for private use in a company car, the percentage used to calculate the car benefit is applied to the benefit multiplier in order to determine the taxable benefit.
- The benefit is charged without reduction for contributions by the employee, unless all private fuel is paid for (in which case there is no benefit). This reimbursement by the employee must be done by 6 July following the end of the tax year, unless the fuel benefit is "payrolled", in which case the deadline is 1 June following the end of the tax year.
- There is no taxable benefit where an employer provides free charging points for electric vehicles at their premises.
- Where the employer provides the car and the employee provides the fuel, HMRC’s advisory fuel mileage rates can be used to reimburse the cost of fuel used on business journeys. This includes reimbursement of 9p/mile for electric cars. Those rates are updated each quarter and published at www.gov.uk/government/publications/advisory-fuel-rates.
Employer-provided van benefits
|Zero emissions van
If the private use of a van is restricted to home-to-work travel, there is no taxable benefit, unlike for company cars.
|Official Rate of Interest (ORI)
- Where a director or employee receives one or more loans from an employer that in total exceed £10,000 at any point in the tax year, interest of at least the ORI must be paid to avoid a benefit charge. There must also be a contractual obligation to pay that interest.
- Where a benefit arises, the excess of the ORI over the actual interest paid must be applied to the value of the loan to calculate the benefit.
- Loans from a close company to shareholders of the company may also generate a tax charge for the company. A close company is (broadly) one under the control of 5 or fewer shareholders.
Tax-free mileage allowances
|Employee's own transport
|per business mile
|Cars, first 10,000 miles
|Cars, over 10,000 miles
- The above mileage rates also apply to employees completing business journeys in their own electric vehicle, as long as the employee is charging the vehicle themself.
- Passenger must be completing the same business journey.
- For all except the business passengers' allowance, if the employer does not pay the full mileage rate, the employee can claim tax relief on any shortfall from HMRC.
Employee share schemes
|Type of share scheme
|Share Incentive Plan (SIP)
|Free shares worth up to £3,600 pa. Employee can buy up to £1,800 pa (or 10% of income if lower) out of pre-tax pay. Employer can match each share bought with up to two more.
|If shares left in the scheme for at least five years: no Income Tax or CGT on the value when they leave the scheme. Gains on disposal are subject to CGT.
|Enterprise Management Incentive (EMI)
|Trading companies with fewer than 250 employees and assets up to £30m can grant options to selected employees to buy up to £250,000 worth of shares.
|No Income Tax or NIC if option is exercised within ten years of option grant. Shares qualify for 10% rate of CGT on disposal if grant is at least two years before disposal.
|Company Share Option Plan (CSOP)
|Share options to buy up to £60,000 of shares can be granted to employees.
|No Income Tax or NIC if option is exercised between three and ten years of grant. Gains on disposal are subject to CGT.
|Save As You Earn (SAYE)
|Employees contribute up to £500 a month to a savings scheme, and use money to exercise share options.
|No Income Tax or NIC if option is exercised three years or more after the grant of option. Gains on disposal are subject to CGT.
- Generally, employees are charged to Income Tax on the value of shares that they are given or are issued to them by their employer, less any amount paid for the shares. NIC are also charged if the company is quoted, or the shares can be easily sold. If the employer operates one of the above tax-advantage schemes, the tax charges may be eliminated, reduced or deferred.
- The employer must register the share scheme with HMRC, using the online Employment Related Securities (ERS) system, by 6 July following the end of the tax year in which the scheme is implemented.
- Employers must file an annual return for each share scheme online through ERS by 6 July each year.
- The above is a very brief summary of the main tax-advantaged share schemes; other conditions apply.
Tax-free Childcare (TFC)
|Contribution limit per child
- Tax-free Childcare (TFC) accounts are available to all eligible parents. You cannot use TFC if you are receiving childcare vouchers, a scheme that is closed to new entrants.
- Under TFC, where both parents work and earn a specified minimum income (but neither has income of more than £100,000 per year), they are able to put up to £8,000 a year per child into an account, which the Government will top up with 25p for every £1 contributed by the parents.
- A TFC account can be used to pay for childcare for a child aged 11 and under, except for disabled children, where the limits are doubled and contributions can continue up to the age of 17.
- Unlike the voucher scheme, TFC is available to the self-employed.
- You cannot get TFC at the same time as claiming Working Tax Credit, Child Tax Credit or Universal Credit.
- Parents of 3 and 4 year-olds may be eligible for up to 30 hours of government-funded childcare, for up to 38 weeks a year, subject to various qualifying condtions.
Main exempt benefits
|Limit of exemption
|One per employee
|For all employees in a staff canteen
|Free parking at or near the employee's place of work
|Annual allowance (see Pensions)
|Personal incidental expenses when staying away from home
|£5 per night, £10 if abroad
|Qualifying relocation expenses
|£8,000 per employee per move
|Medical treatment to help an employee return to work from absence of at least 28 days.
|“Trivial benefits” not given in recognition of work done (or to be done)
|£50 and not cash or a cash voucher; 6 x £50pa cap for directors of most small companies
|Long-service awards where the service is not less than 20 years and no similar award has been made to the same employee within the previous 10 years.
|Non-cash awards of up to £50 per year of service
|Christmas or other annual party open to staff generally
|£150 a head (including VAT) per employee attending (or £300 where employee can bring a guest)
|Home working allowance if required to work from home
|£6 per week or £26 per month (or higher amount if there is evidence of higher costs incurred)
National Minimum Wage
|Rate per hour
|23 and over
|21 – 22
|18 – 20
|*If an apprentice is aged 19 or over and in the 2nd year of their apprenticeship then they must be paid the national minimum wage for their age
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