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:

Defensive stocks provided the FTSE 100’s upside support on Wednesday as investors rotated into equities that tend to do better during economic downturns.

The FTSE 100 was 0.45% higher at 7,670 at the time of writing.

The recent mini banking crisis diverted attention from the underlying health of the global economy – and presented investors with a range of bargains in the aftermath.

Now the FTSE 100 has rebounded from the lows, markets will become increasingly conscious of the economic outlook and ramifications for company earnings. 

OPEC’s move this week to cut production adds to uncertainty. “Clearly, it’s not a positive for global growth,” said Janet Yellen, US Treasury Secretary.

The cut in production risks higher inflation and the possibility of higher interest rates. This could derail the global economy.

“The concern is the Federal Reserve might have to sound the retreat before its war on inflation is truly done. This could leave us with the worst of all worlds – the dreaded stagflation where the economy is shrinking but prices are continuing to surge higher,” said AJ Bell head of financial analysis Danni Hewson.

In preparation for the possibility of choppier times ahead in markets, investors bought into UK-listed utilities, precious metals and pharmaceuticals on Wednesday.

United Utilities was the top gainer at the time of writing, up over 3%. There was also interest in Severn Trent in Centrica, both of which added more than 2%.

AstraZeneca was up around 2% and added a significant number of points to the index due their large market capitalisation.

The rotation away from cyclical stocks was clear. Housebuilding, mining and retail stocks were all in the red.

RS Group, formerly know as Electrocomponets, released their trading statement for the fourth quarter ended March 2023 on Wednesday. The update revealed slowing revenue growth across the group, but the company were confident profit for the year would exceed expectations.

RS Group has a broad product range including electrical and testing equipment, and lines of semiconductors and microprocessors.

All three of their geographies experienced slowing revenue growth in Q4 with sales contracting in the Americas (-4%) and Asia Pacific (-15%) regions. EMEA like-for-like revenue growth slowed to 6% from 12% in Q3. Group revenue grew just 1% in Q4.

RS attributed the poor performance in Asia to Chinese lockdowns and ongoing geopolitical issues, as well as problems in the semi conductor supply chain.

Despite slowing revenue figures, RS Group said they expected operating profit for the year to be ahead of expectations as margin improved slightly.

“Effective execution and the ongoing hard work, enthusiasm and passion of our people has led to a very strong performance in 2022/23 and we anticipate full year adjusted operating profit to be slightly ahead of consensus expectations,” said David Ega, RS Group Chief Financial Officer.

Investors did not share their enthusiasm and passion on Wednesday and shares in the group were down over 4% at the time of writing.

Saga’s IPO at a £2.1 billion valuation seemed a long time ago on Tuesday morning as the company shed another 10% following the release of the group\s preliminary results for the year ending 31st January 2023.

Losses before tax accelerated to £254m from £24m a year prior as a £269m impairment charge to their insurance business destroyed modest underlying profit before tax.

Although, revenue for the year increased to £581.1m from £377.2m as a result of travel bookings bouncing back, concerns about the economic backdrop and insurance business did little to spark optimism among investors.

“Over the past year, through what continued to be a particularly challenging external backdrop, Saga made progress against its strategy while achieving significant revenue growth and returning to underlying profit,” said Euan Sutherland, Saga’s Group Chief Executive Officer.

Underlying profit before tax rose to £21.5m from a £6.7m loss last year.

“The longer the market had to look at Saga’s results this morning the less it liked about them. Yes, in theory the group returned to ‘profit’. But this was an adjusted profit and on a statutory basis losses widened thanks to impairments on its insurance business,” said Danni Hewson, head of financial analysis at AJ Bell.

Hewson continued to explain two big problem’s at Saga – lower cash flow and a big debt pile.

“And cash flow, the one metric which is difficult to massage, was materially lower year-on-year with only a modest reduction in the company’s onerous debt pile.

“Guidance for the insurance business was gloomy and Saga has very little credit in the bank with long-suffering shareholders as it looks to turn around the business.

“In theory Saga’s proposition makes sense. The over-50s are a growing and relatively wealthy demographic who, if they own their homes outright, are less exposed to the recent increases in interest rates.”

Hewson concluded with a damning assessment of Saga time as a listed company:

“However, Saga has never delivered on the promise which accompanied its market listing nine years ago. A series of operational failures have tripped the company up and damaged its credibility.”