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.
The personal allowance is set to remain the same as it was in the previous tax year. Similarly, the threshold for basic and higher rate tax bands will not change. However, 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.
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.
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.
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
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:
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%
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:
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.
Author & Editor: Cherie-Anne Baxter, Marketing Director
Date Written: 6th March 2023
Date Updated: 16th March 2023
Risk Warnings:
Tax treatment varies according to individual circumstance and is subject to change.
Approver Quilter Financial Limited 15/03/2023
