News regarding income from the chancellors autumn statement
Income tax bands frozen until April 2028
In the chancellors recent autumn statement, he announced that from April 2023, the income tax personal allowance is going to frozen at £12,570 until April 2028.
What this means for you:
Personal allowance – First £12,570 earned – Tax 0
Basic rate – £12,571 – £50,270 earned – Tax 20%
Higher rate – £50,271 – £125,140 – Tax 40%
Additional rate – Over £125,140 earned – £45%
These rates apply to all earnings from employment and profit from self employment.
Income tax is also due on some benefits and pensions, the money you get from renting out property and returns from savings and investments above certain allowances.
Basic rate of income tax
You pay the basic rate of income tax on earnings between £12,571 and £50,270 a year.
The basic rate is 20%, so a fifth of the money you earn between those amounts goes to the government.
Higher rate of income tax
The higher rate of income tax is 40% and will be paid on earnings between £50,270 and £125,140 from April 2023.
Once you earn over £100,000 a year, you start losing your tax-free personal allowance.
You lose £1.00 of your personal allowance for every £2.00 that your income goes over £100,000, which means if you earn more than £125,140 a year, you now longer get any personal allowance
For employees, National Insurance is similar to income tax in that it’s also a tax on the money you earn.
You do not pay any national insurance on the first £12,571 that you earn each year.
It is then charged at 12% on earnings up to £50,271 and it is 2% on any money earned above that.
Capital gains and Dividend allowances
Tax free allowances for dividend and capital gains tax is due to be cut over the next 2 years.
The Dividend allowance will reduce to £1000.00 from April 2023 and again to £500.00 from April 2024.
Capital Gains allowance will reduce to £6000.00 per year from April 2023 and again to £3000.00 from April 2024