Find out how your tax rates may change in the new financial year, and what impact this may have on your financial planning.
With the new financial year set to begin on April 6th, 2023, several tax rates are set to change. The Autumn 2022 budget set out many reductions to key personal tax allowances, which could have an impact on your finances.
As of the current tax year, the personal tax allowance in the UK stands at £12,570. This allowance is the amount you can earn before you start paying income tax, providing a financial buffer that’s especially crucial for low and middle-income earners. Over the years, the allowance has gradually increased, reflecting efforts to help taxpayers keep more of their income, though freezes in recent years have reduced the impact of those gains.
Despite these incremental changes, the allowance is reviewed each year, with economic conditions, inflation rates, and government priorities all playing a role. Keeping up to date with these reviews is essential, as any adjustments can have significant implications for your disposable income and financial planning.
The threshold for additional rate taxpayers will lower from £150,000 to £125,140. If you earn over the threshold for additional rates, this means you will start paying more tax sooner than before.
Income tax rates vary for people living in Scotland and are as follows:
If you earn over £100,000, your personal allowance will be reduced by £1 for every £2 over the limit you earn. This means if you earn over £125,140, your personal allowance will be £0.
The starting rate for savings income remains £5,000.
Personal tax allowance isn’t just a technical tax term, it directly affects how much of your income you get to keep. A higher personal tax allowance means you retain more of your earnings, which can be life-changing for many families. It provides extra cash flow to cover essentials like food, bills, education, or healthcare, and helps individuals invest in their future.
It’s also a critical tool for ensuring fairness in the tax system. By setting an income threshold exempt from tax, the government offers some protection to lower earners, preventing them from bearing a disproportionate tax burden. This not only reduces income inequality but also boosts spending power, benefiting the wider economy.
Moreover, a well-calibrated personal tax allowance can encourage workforce participation. Knowing you can earn a reasonable income before paying tax makes work more rewarding, potentially increasing overall employment rates.
Looking ahead, analysts speculate that a modest increase could be on the cards. A potential rise to £13,000 has been discussed, aligning with inflation and providing some relief to taxpayers. Such a change would benefit households across the UK, particularly those on lower and middle incomes, and could stimulate consumer spending. However, these changes are not guaranteed. Much will depend on the state of the UK economy and the government’s budget priorities in 2025. Whether this increase will materialise remains to be seen, but it is certainly an area to watch closely.
If a higher personal tax allowance is introduced, the immediate benefit would be more take-home pay for millions of workers. This boost in disposable income could make a significant difference, especially in today’s climate of rising living costs. Families might find it easier to manage bills, invest in their future, or simply have more financial security.
Economically, increased allowances could drive consumer spending, an essential component of economic growth. More disposable income usually leads to higher demand for goods and services, creating a ripple effect that benefits businesses and, ultimately, the broader economy.
Socially, higher allowances promote fairness by easing the financial strain on those who need it most. By reducing the tax burden for lower earners, the government can help combat income inequality and promote a healthier, more balanced society.
Marriage allowance will remain the same as the 2022/23 tax year. However, married couple’s allowance will rise.
The income limit for a married couple’s allowance, available to married couples where one of you was born before 6th April 1935, is £31,400. Like personal allowance, this is reduced by £1 for every £2 you earn over the limit.
The marriage allowance is a transferable allowance that enables married couples to transfer part of their personal allowance to one another, as long as the recipient is not liable to pay higher or additional tax rates.
Annual allowance: £60,000
Money purchase annual allowance: £4,000
Tapered annual allowance: £240,000
The pension annual allowance is reduced by £1 for every £2 of adjusted income over £240,000, limiting tax relief for high earners, as long as your threshold income is above £200,000. The minimum annual allowance is £4,000.
The lifetime tax-free allowance of £1,073,100 on pension savings has been scrapped.
Corporation Tax is paid to the government by UK companies and foreign companies with UK offices. It is calculated based on profitsDuring the Autumn Statement the government announced a rise in corporation tax. From the new tax year businesses will have to pay the normal rate of corporation tax at 19% if their profits are under £50,000 for the year. For businesses with profits over £250,000 they will need to pay 25% corporation tax. Between these two rates the tax rate will increase gradually for companies as their profit rise from £50,000 to £250,000.
The government will allow businesses to subtract money they invest in IT and plant machinery equipment from the profits they pay corporation tax on for the next three years.
If you receive income from dividends, it is crucial to note that the tax-free dividend allowance is going to halve to £1,000 in the 2023/2024 tax year. Rates are as follows:
For trust income up to £1,000 and interest:
For non-interest trust income over £1,000:
– Inheritance Tax Rate for estates: 40%, or 36% is 10% or more of an estate is left to charity.
– Rate for lifetime transfers: 20%
– Nil-rate band limit: £325,000
– Residence nil-rate band limit: £175,000
– Taper threshold for residence nil-rate band: £2,000,000
The capital gains tax allowance is set to reduce by over half it’s 2022/23 limit.
– Capital Gains Tax annual exempt amount for individuals: £6,000
– Capital Gains Tax annual exempt amount for most trustees: £3,000
– Basic rate taxpayer: 10%
– Basic rate capital gains tax from residential properties: 18%
– Higher & additional rate taxpayer: 20%
– Higher & additional rate capital gains tax from residential properties: 28%
– Rate for trustees: 20%
– Rate of capital gains tax from residential properties for trustees: 28%
– Gains subject to business asset disposal relief: 10%
– Lifetime limit on qualifying gains: £10,000,000
When it comes to stamp duty, different rules apply depending on whether you are in England and Northern Ireland, Scotland, or Wales, or are a non-UK resident. For help and advice on stamp duty, get in touch with us.
For the UK and Ireland, Stamp Duty Land Tax for main residences is as follows until March 31st, 2025:
For additional properties and purchases by companies:
Stamp Duty Land Tax rates for first time buyers:
Class 1 National Insurance Contributions (NIC) rates are:
– Employees: 12%
– Employers: 13.8%
– Lower earnings limit: £6,396
– Primary threshold: £12,570
– Secondary threshold: £9,100
– Upper earnings limit: £50,270
– Upper secondary threshold (under 21s): £50,270
– Apprentice upper secondary threshold (under 25s): £50,270
Class 2 (self-employed) NIC rates are:
– Flat rate: £3.45 for profits over £12,570 per annum
– Small Profits Threshold: £6,725
Class 3 NIC rate is a voluntary contribution at a flat rate of £17.45 per week.
Class 4 NIC is payable where self-employed profits are higher than the lower profits limit.
– Profits between £12,570 – £50,270: 9%
– Profits above £50,270: 2%
Our taxes are shaped by economic, political and social factors. As we approach 2025, keeping an eye on government announcements and understanding how they may impact your finances is crucial. At Unividual, we’re here to guide you through these changes. Whether you’re planning your financial future or adjusting to new tax rules, our team can help. Stay informed, stay prepared, and let us support you in making the best financial decisions for your future.
Understanding tax rates and determining which apply to you can be tricky. However, staying on top of your taxes throughout the year is the key to maximising your tax allowances and paying less tax. The key is to ensure you keep your financial situation under control, well planned and as result you feel less stressed about your financial situation. At Unividual, we’re here to help you make the most of your allowances and put together a financial plan to see you through the year. Curious about how tax changes could impact you? Contact us today for personalised advice and start planning your financial future with confidence.
Author & Editor: Cherie-Anne Baxter, Marketing Director
Date Written: 6th March 2023
Date Updated: 12th November 2024
Risk Warnings:
Tax treatment varies according to individual circumstance and is subject to change.
Approver Quilter Financial Limited 15/03/2023
