diff --git a/VERSION b/VERSION
index 0495c4a8..bf16dded 100644
--- a/VERSION
+++ b/VERSION
@@ -1 +1 @@
-1.2.3
+1.3.0-rc.1
diff --git a/config/components/manager-image/kustomization.yaml b/config/components/manager-image/kustomization.yaml
index 69f2e032..b1207da2 100644
--- a/config/components/manager-image/kustomization.yaml
+++ b/config/components/manager-image/kustomization.yaml
@@ -4,4 +4,4 @@ kind: Component
 images:
 - name: docker.io/kong/gateway-operator-oss
   newName: docker.io/kong/gateway-operator-oss
-  newTag: 1.2.3
+  newTag: 1.3.0-rc.1