Your new tax year checklist
As we go into a new tax year, now’s the time to make sure your savings and investments are set up as tax-efficiently as possible. That means using every available allowance and exemption.
At a glance
- In November, Chancellor Jeremy Hunt introduced sweeping changes to tax allowances and a continued freeze on tax thresholds for basic and higher rate taxpayers.
- It’s more important than ever to ensure you’re using all the allowances and exemptions you’re entitled to.
- We outline the changes to Income Tax and National Insurance, dividend and savings income (frozen until 2028), personal pensions, ISAs, Inheritance Tax, Capital Gains Tax and Corporation Tax.
In his Autumn Statement last November, Jeremy Hunt warned of 'difficult decisions', as the government works to curb inflation, repair the economy, and steer the country through the recession. His plans included a mix of spending cuts, increased income from taxes, and significant changes impacting investors and higher rate taxpayers.
The squeeze on real incomes by rising prices is predicted to reduce our standard of living by 7 per cent in total over 2023-24 – wiping out the previous eight years’ growth.1
All of which means that using all available tax breaks while you have them will help your short and long-term financial security and wellbeing.
As the new tax year starts, here is a reminder of the main tax exemptions and allowances, and what has – or hasn’t – changed for this year.
What’s changed about Income Tax and National Insurance?
The personal allowance – the amount of income you don’t have to pay tax on – remains at £12,570. The basic rate is still 20%, and the higher-rate threshold, at which you start paying 40%, is £50,270. These will be frozen until 2028.
However, the additional-rate tax threshold, at which you pay 45%, drops to £125,140. This change does not yet apply to Scottish taxpayers.
National Insurance contributions (NICs) will be frozen until 2028. Most employees will pay National Insurance at 13.25%, taking the total tax from their salaries, including 20% basic rate, to 33.25%.
What’s changed about Dividend and savings income?
Through the Personal Savings Allowance, basic-rate taxpayers can continue to earn £1,000 interest on savings before paying tax in 2023/24. For higher-rate taxpayers, the allowance remains at £500, and for additional-rate taxpayers, it’s zero.
But there are significant changes to Dividend Tax. The dividend allowance will be cut from £2,000 to £1,000 in 2023/24, and then to £500 in April 2024. If you own shares in a company, or receive dividends from funds or investment trusts, this is likely to affect you.
