Following the recent Autumn Statement, the Government made changes to personal tax resulting in many paying more.
What changes to personal tax were announced?
National Insurance, Inheritance Tax and Income Tax thresholds and Allowances will be frozen for a further two years until 2028.
The Dividend Tax Allowance will come down from its current level of £2,000 to £1,000 in 2023/24 and then to £500 in 2024/25.
In terms of the Capital Gains Tax (CGT), the current Annual Exempt Amount will drop from £12,300 to £6,000 in 2023/24 and then to £3,000 in 2024/25.
From 2025, electric vehicles will be subject to road tax.
The Additional Rate (45p) threshold has been lowered from £150,000 to £125,140.
This means a tax rise on earnings between £125,140 and £150,000 from 40p in the pound to 45p in the pound.
It is estimated that 250,000 workers will be brought up into this top tax bracket.
If you earn £150,000 per annum, this means you will be required to pay an additional £1,243 in Income Tax a year.
How will you be affected?
Income Tax will stay the same for taxpayers below this amount, with the personal allowance frozen at £12,570 and the higher rate tax band starting at £50,271.
If you are a high earner, you are likely to be affected as you will be paying a higher proportion of Income Tax. Your salary may increase but thresholds remain the same meaning you will likely be subject to an increased tax rate.
It is important to plan your finances and understand how this can affect you. Contributing a higher amount to your pension can be a source of tax relief.
You may also want to bring forward any significant disposals to benefit from the higher CGT allowance this year.
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