The UK personal allowance, tax rates and bands for the tax year 2022/23 were announced by the Chancellor in the October 2021 Budget.
The personal allowance is currently £12,570 and will be frozen at £12,570 for the tax years to 2025/26.
There is a reduction in the personal allowance for those with ‘adjusted net income’ over £100,000. The reduction is £1 for every £2 of income above £100,000. So there is no personal allowance where adjusted net income exceeds £125,140.
The marriage allowance permits certain couples, where neither party pays tax in the tax year at a rate other than the basic rate, to transfer £1,260 of their personal allowance to their spouse or civil partner.
The basic rate of tax is 20%. In 2022/23, the band of income taxable at this rate is £37,700, so the threshold at which the 40% band applies is £50,270 for those entitled to the full personal allowance. The tax bands are also frozen for the tax years to 2025/26.
Individuals pay tax at 45% on their income over £150,000.
Savings income is income such as bank and building society interest.
The Savings Allowance applies to savings income, and the available allowance in a tax year depends on the individual’s marginal rate of income tax. Broadly, individuals taxed at up to the basic rate of tax have an allowance of £1,000. For higher rate taxpayers, the allowance is £500. No allowance is due to additional rate taxpayers.
Some individuals qualify for a 0% starting rate of tax on savings income up to £5,000. However, the rate is not available if taxable non-savings income exceeds £5,000.
The first £2,000 of dividends are chargeable to tax at 0% (the Dividend Allowance). For 2022/23 and subsequent tax years, the rate at which dividends received above the Dividend Allowance are taxed has increased across all rates by 1.25% to the following rates:
Dividends within the allowance still count towards an individual’s basic or higher rate band and may affect the rate of tax paid on dividends above the Dividend Allowance.
To determine which tax band dividends fall into, dividends are treated as the last type of income to be taxed.
If you would like any advice about how the Spring Budget 2022 may affect your personal tax please do contact us by calling 0115 928 3228 or by emailing info@coalesco.co.uk
