Test for hidden BDL fact sheet
This fact sheet covers England & Wales. You will need different advice if you live in Scotland.
BDL EW DRAFT 23-24
This fact sheet tells you about the current tax rates and allowances. Use this fact sheet to find out about:
- personal allowances for income tax;
- income tax rates and bands;
- National Insurance contributions for sole traders and partners in a business partnership;
- National Insurance contributions for directors of limited companies and employees;
- corporation tax; and
- value added tax (VAT).
Income tax allowances
Personal allowances 2022/23 2023/24 Personal allowance (1) £12,570 £12,570 Income limit for personal allowance (2) £100,000 £100,000 Income limit for married couple's allowance (3) £31,400 £34,600 Married couple's allowance (maximum amount) (4) £9,415 £10,375 Married couple's allowance (minimum amount) (5) £3,640 £4,010 Blind person's allowance £2,600 £2,870
(1) and (2) Since 2016/17 everyone is entitled to the same Personal allowance and income limit, no matter when they were born.
(3) Where income is above this figure, the allowance is reduced by £1 for every £2 above the limit.
(4) and (5) The relief for Married couple's allowance is given at 10%.
Income tax rates and bands
2022/23 2023/24 Basic rate 20% Personal allowance - £37,700 Personal allowance - £37,700 Higher rate 40% £37,700 - £150,000 £37,700 - £125,140 Additional rate 45% Over £150,000 Over £125,140
Your Personal allowance goes down by £1 for every £2 that your adjusted net income is above £100,000. This means that your Personal allowance is zero if your income is £125,140 or above for tax years 2022/23 and 2023/24.
From 2020/21 tax relief for finance costs for individual landlords of residential properties is fully restricted to the basic rate only. For more information about the changes which were phased in from 2017/18, see HM Revenue & Customs guidance on Tax relief for residential landlords: how it's worked out.
Welsh Rates of Income Tax (WRIT)
Since 6 April 2019, if you live in Wales, you will pay the WRIT. If you are self-employed you will be asked about your country of residence on your self assessment tax return.
Welsh tax payers currently pay the same amount of tax as people living in England, but 10% will go directly to the Welsh Government. For more information, see GOV.Wales.
National Insurance contributions class 2 and class 4
2022/23 2023/24 Class 2 £3.15pw £3.45pw Class 2 - Small profits threshold £6,725pa £6,725pa Class 2 - Lower profits threshold (6) £11,908pa £12,570pa Class 4 - Lower profits limit £11,908pa £12,570pa Class 4 - Upper profits limit £50,270pa £50,270pa Class 4 - Rate between upper and lower profits limit (7) 9.73% 9% Class 4 - Rate above upper profits limit (8) 2.73% 2%
(6) Since 2022/23 self-employed individuals no longer pay Class 2 National Insurance contributions if their profits are between the Small profits threshold and the Lower profits threshold, but will continue to build up National Insurance credits. For more information, see GOV.UK.
(7) and (8) Class 4 contributions are calculated yearly. The 2022/23 figures include a blended rate which takes into account the 1.25% uplift that was in place until 6 November 2022 to fund the NHS, health and social care.
- If you are under retirement age and either a sole trader or a partner in a partnership, the following example calculations will help you work out an estimate of the monthly income tax and National Insurance you should pay on your profit from your business.
- You will then be able to work out your Available drawings from your business. This will help you work out your household budget to show you what you have available to pay your creditors.
- In the following examples, the figure worked out on the business budget sheet for Drawings (what your profit is before tax and National Insurance) is £4,250 per month.
- The example calculations should not be used for income from residential properties.
If you prefer, you can use our online budget to do the income tax and National Insurance calculations for you.
Estimated monthly income tax calculation for 2023/24
1. Insert the monthly Available drawings figure from Your business and household budget sheet £4,250 A 2. Multiply Figure A by 12 to get your yearly drawings figure £51,000 B 3. Insert your Personal allowance for income tax figure £12,570 C 4. Take Figure C (your Personal allowance for income tax) away from Figure B (your yearly drawings) to work out what part of your drawings you pay tax on £38,430 D 5. Multiply the first £37,700 of Figure D by 20% to work out how much Basic rate tax you need to pay £7,540 E 6. Take £37,700 away from Figure D and multiply the answer by 40% to work out how much Higher rate tax you need to pay (you only need to do this step if Figure D is more than £37,700) £292 F 7. Add together Figure E and Figure F to get an estimate of your yearly tax liability £7,832 G 8. Divide Figure G by 12 to get an estimate of your monthly tax liability £652.67 H
Use H £652.67 as the Estimated tax figure on Your business and household budget sheet.
Estimated National Insurance contribution calculations for 2023/24
Class 4 National Insurance contributions
1. Use Figure B from above (unless Figure B is more than the Upper profits limit of £50,270, then insert £50,270) £50,270 I 2. Figure I minus £12,570 (the Lower profits limit) £37,700 J 3. Figure J multiplied by 9% (the rate payable between the lower and upper limits) £3, 393 K 4. Figure B from above minus £50,270 (if the answer is less than 0, insert 0) £730 L 5. Figure L multiplied by 2% (the rate payable above the Upper profits limit) £14.60 M 6. Add together Figure K and Figure M to get your estimated yearly amount of Class 4 contribution £3,407.60 N 7. Divide Figure N by 12 to get your estimated monthly Class 4 contribution £283.97 O
Use O £283.97 as the National Insurance class 4 figure on Your business and household budget sheet.
Class 2 National Insurance contributions
Use a flat rate of £14.95 per month (£3.45 per week) as the Class 2 National Insurance contribution figure on Your business and household budget sheet if:
- you have to pay Class 2 National Insurance contributions; or
- your self-employed profit is below the Small profits threshold and you decide to pay Class 2 National Insurance contributions voluntarily.
Remember, if you prefer, you can use our online budget. It will work out the income tax and National Insurance calculations for you.
National Insurance contributions class 1
Thresholds 2022/23 (from 6 April 2022 to 5 July 2022) 2022/23 (from 6 July 2022 to 5 April 2023) 2023/24 Lower earnings limit primary class 1 £123pw £123pw £123pw Upper earnings limit primary class 1 £967pw £967pw £967pw Primary threshold £190pw £242pw £242pw Secondary threshold £175pw £175pw £175pw
Employee rates 2022/23 (from 6 April 2022 to 5 November 2022) 2022/23 (from 6 November 2022 to 5 April 2023) 2023/24 Class 1 rate between primary threshold and upper earnings limit 13.25% 12% 12% Class 1 rate above upper earnings limit 3.25% 2% 2%
Employer rates 2022/23 (from 6 April 2022 to 5 November 2022) 2022/23 (from 6 November 2022 to 5 April 2023) 2023/24 Secondary class 1 rate above second threshold 15.05% 13.8% 13.8% Class 1A rate on employer provided benefits (9) 14.53% 14.53% 13.8%
(9) Class 1A contributions are calculated yearly. The 2022/23 figure includes a blended rate which takes into account the 1.25% uplift that was in place until 6 November 2022 to fund the NHS, health and social care.
For information about National Insurance thresholds and rates that apply to special categories, such as for employers of qualifying veteran, freeport and apprentice employees, see GOV.UK.
For non-ring fence profit
2022/23 2023/24 Main rate (companies with profits over £250,000) 19% 25% Small profits rate (companies with profits under £50,000) - 19% Marginal relief lower limit - £50,000 Marginal relief upper limit - £250,000 Marginal relief fraction - 3/200
From 1 April 2015 to 31 March 2023, there was a single corporation tax rate for non-ring fence profits.
From 1 April 2023, there is no longer a single corporation tax rate for non-ring fence profits. If your company has taxable profits between £50,000 and £250,000, from 1 April 2023 you may be able to claim marginal relief to reduce your corporation tax rate from the 25% main rate. Use the GOV.UK calculator to work out how much marginal relief you can claim.
Value added tax (VAT)
2022/23 2023/24 Standard rate 20% 20% Reduced rate 5% 5% Zero rate 0% 0% Registration level £85,000 £85,000 De-registration level £83,000 £83,000
Making Tax Digital for VAT was introduced on 1 April 2019 for businesses with a taxable turnover above the VAT registration threshold. Since 1 April 2022, unless HMRC gives an exemption from doing so, all VAT registered businesses must be signed up to Making Tax Digital for VAT whatever their turnover. For more information, go to www.gov.uk.