Tax Rates and Allowances
Tax allowances for 2022/23
|Married Couple's Allowance (MCA)||One or both born before 6th April 1935||£9,415*|
|Blind Person's Allowance||£2,600*|
|Personal Savings Allowance Basic rate||£1,000|
|Personal Savings Allowance Higher rate||£500|
|0% savings rate||£5000|
*Note: The Personal Allowance is reduced for those with total incomes over £100,000 by £1 for every £2 over this amount. This means Personal Allowance becomes zero at income of £125,140 or above.
*Note: Married couple's allowance (MCA) is restricted to 10% of the value and reduces tax due, not tax-free income. It is only available where at least one spouse is born before 6 April 1935. It is also withdrawn by £1 for every £2 of income if an income goes above the limit of £31,400 until it is reduced to the minimum level of £3,640 (i.e. where income exceeds £42,950).
*Note: Blind person's allowance can be claimed by those who are registered severely sight impaired (SSI) with a local authority. You do not have to be totally sightless to be registered blind. Any part of this allowance that is unused by the recipient can be transferred to their spouse or civil partner. If either spouses or civil partners are registered blind, they will both get the allowance. Eligibility rules are slightly different in Scotland.
Marriage Allowance: This allowance is available to married couples and civil partners where both parties are no more than basic rate taxpayers and one party wants to transfer 10% of their personal allowance (2022/23 personal allowance is £12,570) to the other. This is usually where there is unused allowance available because one is a non-taxpayer. It effectively reduces the recipient’s tax bill by up to £252 for 2022/23 but can only reduce their tax bill to zero. If you claim the married couple’s allowance above you cannot claim this one. Where a partner has died before the claim was made, claims can be backdated by up to 4 years.
Personal Savings Allowance (PSA): This allowance means that £1,000 (basic rate taxpayers) of your savings income such as bank interest are not taxable (£500 for higher rate taxpayers, zero for additional rate). It is separate and additional to the starting rate for savings income, for those eligible for both. They act together to mean that if you add up your total income, including savings income, and it is below £18,570 you won’t have to pay tax on your it.
Dividend Allowance: The first £2,000 of dividends will not be taxed. Any dividend payments over this amount will be taxed by reference to a person’s marginal rate. To determine what your marginal rate is, add up all of your taxable income including saving income and dividends, with dividends being the top part and then check the table below to see which tax rate applies to you.
Tax rates and bands for 2022/23
|First £37,700 of taxable income*||20%*|
|£37,701 - £150,000*||40%*|
|Starting rate – for interest falling in first £5,000 of income above Personal Allowance**||0%|
|Standard savings rate - higher rate taxpayers will have a further 20% to pay, additional rate tax payers a further 25%||20%|
|Dividend income above the allowance but falling within basic rate tax limit||8.75%|
|Dividend income falling between £50,001 and £150,000||33.75%|
|Dividend income falling above £150,000||39.35%|
|Inheritance tax Nil Rate Band (NRB)||£325,000|
|Residential Nil Rate Band (RNRB)||£175,000|
|Inheritance tax rate above NRB||40%|
|Capital Gains tax exemption - individual||£12,300|
|Capital Gains tax exemption - trust||£6,150|
|Capital Gains tax rate on excess gains up to basic rate limit||10%#|
|Capital Gains tax rate on excess gains above basic rate limit||20%#|
*In Scotland five tax bands apply for the 2022/23 tax year. The first £2,162 over the personal allowance of £12,570 is taxed at 19%, the next £10,956 at 20%, the next £17,974 at 21%, thereafter at 41% up to £150,000 and then 46% thereon.
**Only applies if your other (non-savings) income is below your allowances plus £5,000 for this tax year. Where non-savings income exceeds allowances the £5,000 is reduced, eventually being eliminated. Also consider the personal savings allowance mentioned above.
Note – Scottish taxpayers should use the English rates and bands for their savings and investment income.
If you live in Wales, from 6th April 2019 you are potentially subject to Welsh income tax rates, set by the Welsh Government. For the 2022/23 tax year, they are the same as the main rates and allowances listed above, as for England and Northern Ireland.
From April 2016 banks and building societies no longer take tax at source from savings interest. If your total income ignoring dividends is within the starting rate for savings and/or the PSA then you have nothing to do. If it is higher you need to contact HMRC to make sure any tax due is collected.
#18%/28% for gains from residential property and carried interest.
Rent a Room - The allowance is £7,500.
Property and trading income allowances: Individuals with property income or trading income below £1,000 do not need to declare or pay tax on that income. Those with income above the allowance will be able to calculate their taxable profit either by deducting their expenses in the normal way or by simply deducting the relevant allowance.
Foreign pensions: From 2017/18 the rule where only 90% of foreign pension income is charged to Income tax was removed meaning that 100% of foreign pensions are now taxable on UK residents, but subject to any double tax relief available.
How tax is collected has changed: From April 2017 HMRC started to collect as much tax as possible in the year it is due, where in the past it was often collected in the following year. This means that some people will have underpayments for earlier years and the current tax year in their current tax code. So, if your circumstances change for example, you start your state pension and there is tax to be collected, HMRC will try to collect it ‘in year’ by reducing your tax code. If this isn’t possible because it reduces another income by more than 50% or it is too late in the tax year, they will reduce your tax code in the following year as well. HMRC will tot up at the end of the year and where there is an overpayment will repay you. For larger (over £3,000) underpayments or if it isn’t possible to collect it through PAYE they will send you a ‘Simple Assessment tax calculation’ which will ask for payment. The tax is due by the later of 31 January after the tax year end, or 3 months after the assessment date if it is after 31 October. Penalties and interest may be payable on late payments.
Rental income: From April 2017 finance costs (including mortgage and loan interest for buying furnishings) on residential properties started to be restricted to the basic rate tax on a phased basis. From 2020-21 all financing costs are now given as a basic rate tax reduction.
Help to Save: The Help to Save scheme was launched to help people on low-incomes claiming universal credit or working tax credits to save. Help to Save pays a 50% bonus on the amount saved, up to a maximum bonus of £1,200 over four years The bonus is paid after two years with an option to save for a further two years, meaning that people can save up to £2,400 and benefit from government bonuses worth up to £1,200. You can save between £1 and £50 per month, but you don't have to save every month. People are able to use the funds in any way they wish.
ISA contribution limit: You can save up to a maximum of £20,000 per year (for 2022/23), and this can be in a cash ISA, a stocks & shares ISA, an innovative finance ISA, a Lifetime ISA or a mixture of all of them.
If you are having problems with tax, call Tax Help on 01308 488066