On the 17th of November there were several changes announced that will affect tax for future years.
Personal Tax & National Insurance bands
- The thresholds at which these apply are to be frozen at their current levels until April 2028. (For anyone who enters the 40% higher rate tax band as a result, their annual £1,000 savings income exemption is cut to £500.)
- The additional rate of income tax (45%) threshold is also to be lowered from £150,000 to £125,140 from 6th April 2023.
- The current tax-free annual dividend allowance of £2,000 is to be reduced to £1,000 for the 2023/24 tax year, and to £500 for the 2024/25 tax year.
Capital Gains Tax
- The current annual capital gains tax exemption allowance of £12,300 is to be reduced to £6,000 for the 2023/24 tax year, and to £3,000 for the 2024/25 tax year.
State pension increase
- As the state pension is due to increase with inflation, combined with the frozen personal allowance, there is the possibility that this will exceed the personal allowance in coming years. This would mean that many pensioners could become taxpayers again in the future.