As we draw ever closer to the start of the new tax year, it’s important to remind ourselves of the tax changes coming up.

Measures from November’s Autumn Statement will soon roll out, affecting taxpayers across the board. We also have yet to hear from the Chancellor again in his Spring Budget on 15 March – so what we know now is subject to change.

The amount of tax you pay HMRC could soon increase. Here’s everything you need to know about the upcoming tax changes in 2023.

Income tax

One of the biggest shakeups from 2022 was the cutting and u-turning of the additional rate tax band. Originally, former Chancellor Kwasi Kwarteng (controversially) declared that he intended to scrap the 45% income tax rate altogether.

This soon changed when he was replaced by Jeremy Hunt, who, in November’s Autumn Statement, cut the additional rate threshold from £150,000 a year to £125,140.

Coming into effect from 6 April, this cut will mean an estimated 250,000 taxpayers will move from the higher rate to the additional rate tax band.

The personal allowance (£12,570), as well as the basic and higher income tax rates will remain frozen until 2028.

Capital gains tax and dividends

From April, the capital gains allowance will be markedly reduced. Currently, you have a tax-free allowance of £12,300, but for 2023/24, this will decrease by more than 50% to £6,000 a year. Next year the Government will slash the allowance again to £3,000.

Capital gains tax rates that apply after the tax-free allowance will remain the same for basic and higher-rate taxpayers:

Tax band Tax rate for property Tax rate for other assets
Basic rate 18% 10%
Higher rate 28% 20%

The annual dividend allowance will also be cut from £2,000 to £1,000 and, much like capital gains tax, will drop again to £500.

Dividend tax rates will remain the same:

Income tax band Dividend tax rate 2023/24
Basic rate 8.75%
Higher rate 33.75%
Additional rate 39.35%

Stamp duty

As per September’s mini-budget, stamp duty land tax allowances will increase for both existing and first-time buyers.

Until 31 March 2025, first-time buyers in England and Northern Ireland won’t need to pay stamp duty on the first £425,000 on their property, while existing homeowners won’t have to pay stamp duty on the first £250,000.

If you live in Scotland, homeowners start paying land and buildings transaction tax (LBTT) on properties costing more than £145,000. Scottish Budget proposals set out plans to keep these thresholds unchanged in 2023/24.

Inheritance tax

Much like income tax (not including the additional rate), inheritance tax thresholds will also remain frozen for the next few years.

The nil-band rate, which is the amount you can pass on before incurring an inheritance tax bill, will remain at £325,000 until April 2028. Similarly, the residence nil-rate band – which applies if your home is left to direct family – will also remain at £175,000.

As the rate will not rise with inflation, there’s more of a chance of people’s estates going above the tax threshold.

Stay ahead of the changes

It’s always important to stay ahead of the tax changes coming in from April, especially if your take-home pay is going to be affected.

If you’re ever in doubt and need to seek the advice of a friendly and professional accounting firm, we’re just a phone call away.

Get in touch to discuss this April’s tax changes.

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