Tax changes for the 2023/2024 tax year

The new tax year has ushered in a series of changes to tax including capital gains tax, dividends and early stage investment schemes such as the Seed Enterprise Investment Scheme.

The tax changes will have implications for investors who will have to considered them carefully when managing their portfolios. The below summary is by no means exhaustive.

Capital Gains Tax

Capital gains tax is changing and will continue to continue to change in subsequent tax years.

In the new tax year starting April 2023, the Capital Gains Tax annual allowance will reduce to £6,000 from £12,300.

In 2024, this will fall further to £3,000 from April 2024.

Seed Enterprise Investment Scheme (SEIS)

SEIS is a generous tax incentive to facilitate investment by private individuals into start ups at their earliest stage. Tax benefits for investors include 50% income tax relief on the amount invested, exemption from capital gains on disposal, and loss relief.

The annual amount an investor can invest through the SEIS scheme will double from £100,000 to £200,000.

In addition, companies can now raise £250,000, up from £150,000 previously. Rules on the type of companies able to raise funds through SEIS will also change.

Companies that have been trading for less than three years can now utilise the scheme, an expansion from those trading for less than two years previously. Gross assets allowable to qualify for SEIS will be increased to £350,000.

EIS rules will stay the same.

Income Tax

The Basic rate tax band of 20% will remain at £37,700 in the 2023/24 tax year. The higher tax rate of 40% will be applied to £125,140, this is down from £150,000. The additional tax rate of 45% will apply to all earnings above £125,140.

Dividend tax rates

The dividend allowance will fall to £1,000 in 2023/24, down from £2,000 in 2022/23. This is set to fall further to £500 in the next tax year.

After the dividend allowance, dividends will be taxed as follows: