With the start of the new tax year approaching, tax specialists, RIFT Tax Refunds, have created a guide to the tax changes that will come into play on 6 April and how they will impact people and businesses, with many expected to pay even more than they do already.
In the 21/22 tax year, HMRC collected £715.5 billion in tax receipts marking a 22.5% rise from the previous year, and by far the largest sum collected in more than two decades.
Almost £221bn, or 31%, of this total came from income tax, of which £188bn came through PAYE, and £37bn from Self Assessment.
As we now reach the end of the 22/23 tax year and HMRC is busy totting up this year’s receipts, it’s time to start looking towards the new tax year and the rule changes that are going to impact both individuals and businesses in 23/24.
Capital Gains & Dividend Tax Allowance
The most significant changes for the coming year will be those surrounding Capital Gains and Dividend Tax Allowance.
Capital Gains will drop from £12,300 to £6,000 which will increase the amount of capital gains tax paid, and reduce the profits gained from selling any valuable assets such as property.
Come the 24/25 financial year, capital gains tax will be reduced again to just £3,000.
Dividend Allowance – the amount of profit you can receive from company shares before paying tax – will be cut from £2,000 to £1,000 in 23/24 before falling to £500 in 24/25.
Income tax rules will remain largely unchanged this year. The basic rate of income tax will stay at 20% and personal allowance – the amount of income you can earn before you start paying income tax – will remain at £12,570 after being frozen through to April 2028.
Despite this, however, some people will still find themselves paying more tax in the coming year due to salaries rising in line with inflation, not least for those whose salary increase pushes them into a higher tax bracket.
National Insurance & inheritance Tax
National Insurance rules will remain unchanged in 23/24.
Inheritance Tax rules will also remain as they are having been frozen until 2028. This means the nil-rate band will continue to be £325,000 with tax charged at 40% for anything over the threshold.
Bradley Post, MD of RIFT Tax Refunds, said, “For the most part, the new financial year will see tax rules remain largely unchanged due to freezes implemented by the government. This is done in order to create fiscal drag and thus increase the money the government receives by pulling more earners into the income tax system for the first time while pushing others into higher brackets.
The government has spent a lot of money recently, what with COVID-19 and the current cost of living crisis, so it was inevitable that they would seek to recoup this through the taxpayer.
So, while frozen rates sound beneficial to the average earner, they’re actually going to reduce take-home pay. Combine this with the reduction in capital gains allowance and dividends allowance and we can expect the UK’s 23/24 tax bill to be even higher than the historic numbers seen in recent years.”