** Many changes announced in the Growth Plan have now been abandoned as below **
On Friday 23rd September, the previous Chancellor announced several plans that will affect individuals and the self-employed:
1% Reduction in income tax
From April 2023, it is planned to reduce the basic rate of income tax from the current 20% to 19%.
The 20% rate for gift aid will continue to apply until April 2027.
The tax relief on pension contributions can continue at 20% until April 2024.
Abolishing the additional tax rate
At present, the highest rate of income tax is 45% on income above £150,000pa.
It is planned that this will be abolished from April 2023 – making the top rate 40%.
The dropping of the additional rate will also apply to savings and dividend income rates.
Reverting the dividend tax rate
In 2021/22, the rates of tax on dividend income were 7.5% for basic rate taxpayers and 32.5% for higher rate, 38.1% for additional rate taxpayers.
These were increased by 1.25% from April 2022, however are planned to drop back to their original levels from April 2023.With the abolition of the additional rate, the highest rate on dividends will therefore become 32.5% from April 2023.
Reverting the national insurance rates
The rates on national insurance increased by 1.25% in April 2022, however are planned to drop back to their original levels in November 2022.
The ‘social care levy’ of 1.25% that was to apply to employees and the self-employed above state pension age next year will also no longer apply.
If you have any queries about the planned tax changes and how they will apply to you, please do make contact.