- 25th November 2022
The higher rate income tax threshold and personal allowance were already in line to be frozen at the 2021/22 levels for two years, and now they will be stuck at those monetary amounts until 6 April 2028.
This will drag significant numbers of taxpayers into the 40% tax band, and once in that band their savings allowance is cut from £1000 to £500 - another stealth tax.
More people will also find themselves paying the additional rate: 45%, as the threshold will be brought down to £125,140 on 6 April 2023. Additional rate taxpayers completely lose their savings allowance.
The blind persons allowance and the married couples’ allowance (for those born before 6 April 1935), are both increased for 2023/24. But the transferable marriage allowance is stuck at £1260.
Self-employed individuals will pay more class 2 NIC as the rate will rise from £3.15 to £3.45 per week. Class 3 NIC will also rise from £15.85 to £17.45 per week. The small profits threshold is fixed at £6,725 until April 2028.
The thresholds for class 4 NIC are also frozen at their current levels until 2028 as they are now aligned with the personal allowance and the 40% threshold. The Chancellor did not confirm that the rates of class 4 NIC will remain unchanged, but we have to assume they will.
The inheritance nil rate band (£325,000) and residence nil rate band (£175,000) are both frozen at those levels until April 2028. This means the nil rate band won’t have moved for 19 years, dragging more estates into paying IHT every year.
Look at your house value and tot up how much IHT your beneficiaries will have to pay. Remember donations to charity in your Will are not only free of IHT but can reduce the IHT rate payable on the rest of the estate to 36%.
This information is taken from the weekly Tax Tips, published by the Tax Advice Network, for which you can subscribe at www.TaxAdviceNetwork.co.uk
Any news or resources within this section should not be relied upon with regards to figures or data referred to as legislative and policy changes may have occurred.