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Self-employed tax brackets 2023/24: new thresholds, rates and allowances

4-minute read

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Catriona Smith

Catriona Smith

23 March 2023

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What will self-employment tax be for 2023/24? There are usually new UK tax brackets and other updates to thresholds introduced each April.

So here are eight self-employed tax changes to understand for the new tax year, from National Insurance hikes to business rates changes.

Tax changes small businesses need to know

Here's what you need to know for the tax year 2023/24.

1. What’s the personal allowance 2023/24?

The personal allowance in 2023/24 will remain £12,570. This is how much you can earn tax free.

The government has frozen this tax allowance until 2026. Businesses and taxpayers in general face rising costs throughout 2023, so could feel the pinch of this personal allowance freeze.

And over the long-term, if earnings rise and the personal allowance stays the same, then you’ll pay more in tax.

2. UK tax brackets 2023 – update for the self-employed

The additional income tax threshold is £125,140 (reduced from £150,000 in April 2023). This means more self-employed people could fall into this tax bracket this tax year.

These are the income tax rates and thresholds the self-employed should be aware of in 2023/24 (these are the same as 2022/23):

  • basic rate – 20 per cent on income between £12,571 and £50,270 – you pay tax on £37,700
  • higher rate – 40 per cent on income between £50,271 and £150,000
  • additional rate– 45 per cent on income above £150,000

There are different bands and rates for Scotland.

3. Increase to the National Insurance tax rate – no longer going ahead

The self-employed usually pay both Class 2 and Class 4 National Insurance through their annual Self Assessment tax return.

Small business owners with staff also need to pay employee National Insurance contributions via payroll.

A planned rise in National Insurance in 2023 was reversed in autumn.

Tax thresholds for Class 2 NICs and Class 4 NICs

2023/24 thresholds

2022/23 thresholds

No National Insurance incurred between

£0 to £6,724

£0 to £6,724

Small profits threshold for Class 2 NICs

£6,725

£6,725

Lower profits limit for Class 4 NICs

£9,880

£9,880

Upper profits limit

£50,270

£50,270

Here are the National Insurance rates:

  • Class 2 NICs at £3.45 a week in 2023/24 (up from £3.15 in 2022/23)
  • Class 4 NICs up to the upper profits limit at 9.73 per cent (for 2022/23 tax year)
  • Class 4 NICs above the upper profits limit at 2.73 per cent (for 2022/23 tax year)

Check the government website for more information.

Employer and employee National Insurance contributions (Class 1)

If you’re an employer, or also have income from employment, here are the Class 1 National Insurance tax thresholds.

Tax thresholds for Class 1 (primary) National Insurance

2023/24 weekly threshold

2023/24 annual threshold

Lower earnings limit

£123

£6,396

Primary threshold

£242

£12,570

Upper earnings limit

£967

£50,270

Earnings above the primary threshold incur NICs at 12 per cent in 2023/24.

Earnings above the upper earnings limit incur NICs at 2 per cent in 2023/24.

Tax thresholds for Class 1 (secondary) National Insurance

Employer NICs are due on annual salary payments to employees above a certain threshold. This is £9,100 in 2023/24 (a weekly threshold of £175).

The rate is 13.8 per cent in 2023/24 (down from 15.05 per cent in 2022/23).

National Insurance is also due at this rate on any work benefits you give employees.

4. Changes to wage rates for employers

Rate from April 2023

Previous rate

National living wage

£10.42

£9.50

Rate for 21-22 year olds

£10.18

£9.18

Rate for 18-20 year olds

£7.49

£6.83

Rate for 16-17 year olds

£5.28

£4.81

Apprentice rate

£5.28

£4.81

Read more about the national minimum wage.

5. Tax rates for dividends in 2023/24

The dividend tax rate is staying the same in 2023/24.

But Jeremy Hunt slashed the dividend allowances in his Autumn Statement, so for 2023/24 you’ll pay dividend tax on the dividends you earn above £1,000 (instead of £2,000) at these rates:

  • basic rate taxpayers – 8.75 per cent (up from 7.5 per cent)
  • higher rate taxpayers – 33.75 per cent (up from 32.5 per cent)
  • additional rate taxpayers – 39.35 per cent (up from 38.1 per cent)

The dividend allowance will be cut again to £500 for the 2024/25 tax year.

6. Making Tax Digital delayed for Self Assessment tax payers

Making Tax Digital has been in place since 2019 for VAT-registered businesses with a taxable turnover of more than £85,000. And it came in for all other VAT-registered businesses in 2022.

This system requires businesses to keep digital records and file VAT returns digitally. Businesses need to use relevant accounting software.

Eventually all taxpayers will need to use Making Tax Digital, but it won’t apply for Self Assessment returns until at least 2026 – three years later than planned.

Read more about Making Tax Digital.

7. HMRC points-based tax penalties

A new points-based system for tax penalties was introduced in January 2023.

Initially this will just apply to VAT-registered businesses, but will affect Self Assessment tax payers (with an income of more than £50,000 a year) from 2026.

Make sure you’re up to speed with the changes.

8. Changes to business rates

Retail, hospitality, and leisure businesses should be aware of the business rates changes for 2023.

From April 2023, business rates will apply based on a new rateable value. This is to take into account changes in property value since 2017.

To help with this transition, the government has confirmed:

  • business rates relief for 2023/24 is increasing to 75 per cent
  • a cap to bill increases as a result of revaluation (15 per cent for small properties and 30 per cent for medium-sized and larger properties)
  • multipliers are frozen for 2023/24
  • £600 cap a year on increase to bills from April 2023 if you’re no longer eligible for small business rates relief after the property’s revalued

Other UK tax brackets 2023

  • the capital gains tax allowance for individuals is £6,000 (previously £12,300) and £3,000 for trusts (previously £6,150 for trusts)
  • changes to the capital gains tax-free allowance on a property that's not your main home from April 2023 – dropping to £6,000 (from £12,300)
  • corporation tax is 25 per cent for larger businesses from April 2023
  • dividend tax allowance is changing to £1,000
  • other allowances remain the same, including the Individual Savings Account (ISA) allowance at £20,000 and no changes to tax on savings interest
  • as announced in the Spring Budget, the fuel duty cut by 5p a litre has been extended until April 2024
  • the plastic packaging tax rate changes from 1 April 2023 in line with the Consumer Price Index
  • pension tax changes from April 2023 include removal of the lifetime allowance charge (before it's scrapped entirely in April 2024)
  • annual flat rate road tax is £180 from 1 April 2023 (increasing from £165 for 2022/23)
  • Research and Development (R&D) relief reduction from 1 April 2023 – the deduction rate for small business research and development rate is 86 per cent and the credit rate is 10 per cent

Small business guides and resources

Please use this article as a guide and get professional tax advice on self-employed tax brackets if you're not sure about anything.

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As one of the UK's biggest self-employed insurance providers, we specialise in public liability insurance and protect more trades than anybody else. Why not take a look now and build a quick, tailored quote?

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Photograph: Andrey Popov/stock.adobe.com
Catriona Smith

Written by

Catriona Smith

Catriona Smith is a content and marketing professional with 12 years’ experience across the financial services, higher education, and insurance sectors. She’s also a trained NCTJ Gold Standard journalist. As a Senior Copywriter at Simply Business, Catriona has in-depth knowledge of small business concerns and specialises in tax, marketing, and business operations. Catriona lives in the seaside city of Brighton where she’s also a freelance yoga teacher.

We create this content for general information purposes and it should not be taken as advice. Always take professional advice. Read our full disclaimer

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