Over the course of the year, the Chancellor has announced some key personal tax updates in both his Spring Budget and Autumn Budget.
Many changes are due to take effect from 2022/23.
Tax rates and allowances 2022/23
As announced in the Spring Budget earlier this year, the personal allowance of £12,570 and the basic rate limit of £37,700 are frozen until the end of the 2025/26 tax year.
The income tax basic rate will remain at 20%, the higher rate 40% and the additional rate 45% for 2022/23.
The capital gains tax annual allowance will remain at £12,300 until the end of the 2025/26 tax year.
Capital gains tax rates remain unchanged for 2022/23.
The inheritance tax thresholds and rates remain unchanged, and the nil rate band is frozen at £325,000 until April 2026.
Dividend tax rates
In September, the Prime Minister announced to Parliament that the dividend rates will increase by 1.25% to reflect the new 1.25% health and social care levy on employment income.
These changes will take effect from 2022/23 however, the dividend allowance will remain at £2,000.
Dividends within the basic rate band will increase from 7.5% to 8.75%.
Dividends within the higher rate band will increase from 32.5% to 33.75%
Dividends above the higher rate will increase from 38.1% to 39.35%
National Insurance contributions
A new 1.25% Health and Social Care Levy was announced in September to fund the health and social care sector.
Employees, companies, and freelancers will pay the new 1.25% tax from 6 April 2022.
The new tax will be based on National Insurance contributions and will be legislatively separate from 2023.
Pension Tax Relief Administration: Top-up for low earners in Net Pay Arrangements
From 2024/25 onwards, a new system will be introduced to allow for top-up payments to be made directly to those with taxable incomes below the personal allowance, who are using a Net Pay Arrangement (NPA) to save into a pension scheme.
The top-up payments will be paid after the end of the relevant tax year. The first payment will be made in 2025/26 and will continue respectively.
Increase in normal minimum pension age
The normal minimum pension age in which people can access their pensions without incurring tax charges is increasing from 55 to 57. This change will take effect from 6 April 2028.
For more information on personal tax changes, feel free to contact us.
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