The arrival of the new financial and tax year has meant the arrival of a number of changes to personal tax in the UK. It is important to be aware of these changes and how they may affect you.
When it comes to Income Tax, the personal allowance at the lower and higher rates were left the same until 2028. The lower rate personal allowance is £12,750 and the higher rate is £50,720.
However, those earning above £125,140 will have an increased tax rate from 40 per cent to 45 per cent due to changes to the additional rate threshold.
This means that high earners will now pay a 45 per cent tax on any amount earned after £125,140.
If you earn £150,000 per annum, this means you will be required to pay an additional £1,243 in Income Tax a year. It is estimated that 250,000 workers will be brought up into this top tax bracket due to this change.
Other taxes and allowances
National Insurance and Inheritance Tax thresholds are also frozen for a further two years until 2028.
While this may provide some certainty to Inheritance Tax rates, inflation and rising property prices may mean that many taxpayers find that their estates are now subject to this tax for the first time.
The Dividend Tax Allowance has also dropped from its previous level of £2,000 to £1,000 in 2023/24 and will fall further to £500 in the 2024/25 tax year.
In terms of the Capital Gains Tax, the previous Annual Exempt Amount has dropped from £12,300 to £6,000 in 2023/24 and will also fall to £3,000 in 2024/25.
The Lifetime Pension allowance charge has been removed from April 2023, before the allowance is abolished entirely from April 2024.
The Pension Annual Allowance has also increased from £40,000 to £60,000 from April 2023.
Money Purchase Annual allowance has also increased from £4,000 to £10,000, which applies if you have already started drawing a pension.
For help and advice on personal tax issues, contact us today.