What Changes Are Coming in the 2023/24 Tax Year?
Each new tax year, it is normal to expect adjustments to tax rates, allowances, and thresholds. After a challenging financial year for many, the 2023/24 tax year is no different, with several shake-ups set to be introduced. The Autumn 2022 budget announcement set out what changes can be expected.
Personal allowance has been frozen in England and Northern Ireland until April 2028. This is the amount of income you earn before you begin to pay income tax. So, your personal allowance will remain at £12,570. On the basis that salaries are set to rise in line with inflation you might find yourself paying more tax on your income, particularly if salary increases end up pushing you into higher tax brackets. Minimum wage earners in particular will find themselves impacted, with the minimum wage set to rise from £9.50 to £10.42 an hour for over 23s.
While basic and higher tax rates remain unchanged, the rate for additional tax payers has been slashed from £150,000 to £125,140, meaning more will find themselves pushed into paying the top rate of 45% on more of their income.
The tax rates for England, Northern Ireland, and Wales are identical. However, for Scotland, there are five tax brackets instead of three. For Scottish taxpayers, the starter rate, basic rate, and intermediate rate of paying tax will not change. However, the higher rate is set to rise to 42%, and top rate taxpayers will see an increase to 47%.
The 2022/23 tax year was a rollercoaster for national insurance contributions, with rates increasing by 1.25 percentage points in April 2022. In July, the contribution threshold increased from £9,880 to £12,570, and in the September mini-budget, the increase was abolished.
There will be no further changes to National Insurance when the new tax year begins. Employees who earn between £12,570 and £50,270 will pay at a rate of 12%, for earnings over and above £50,270 tax payers will pay 2%.