Below is a summary of the new tax rates and allowances for the current tax year ending on 5 April 2023
The tax-free personal allowance remains frozen at £12,570. The 40% higher rate band thresholds of £50,270 for higher rate tax and £150,000 for the additional tax rate of 45% remain the same.
The tax-free personal allowance is reduced for higher earners so that for every £2 above the £100,000 income limit, your personal allowance reduces by £1. Once your earnings reach £125,000 the personal allowance is lost in full.
From 6 April, employees and employers will have to pay an extra 1.25% on their National Insurance contributions (NICs). Last year’s rates of 12% on earning up to £50,270 and 2% on amounts above this, will now mean that employees will pay 13.25% and 3.25% respectively.
This controversial tax rise was mitigated by the announcement in the spring statement that the NIC threshold would be aligned with the personal allowance. This roll back does not however kick in until July 2022. For company directors who pay NIC on a cumulative basis, this makes the annual primary threshold £11,908 for the year.
For the self-employed the class 2 small profits threshold increases to £6,725. Profit exceeding this amount will have to pay £163.80 for the year. The lower profits annual figure for Class 4 NIC is £11,908 which aligns with the rates for employees.
The tax-free dividend allowance remains at £2,000 per annum. Dividend tax rates have been increased to help fund health and social care. The increased rates are now 8.75% for basic rate taxpayers, 33.75% for higher rate payers and 39.35% for additional rate payers.
Capital Gains Tax
The annual exempt amounts remain the same in 2022/23 being £12,300 for individuals and £6,150 for trusts. The rate of tax remains the same at 10% for basic rate taxpayers and 20% for higher rate payers unless the gain is from the sale of residential property. Residential property gains are taxed at 18% or 28% for basic and higher rate taxpayers.
Click here for further commentary on the spring statement and to view the Dafferns tax card for 2022/23.
Please contact Karen Keeling if you require any further assistance.