The UK tax system is complex and ever-changing. It includes various taxes, relief schemes, allowances, and other crucial factors. Income tax is one of the most important taxes as it’s the biggest source of funding for the UK government. It’s applied to any individual that earns through employment, partnership, business, etc.
During the recent Autumn statement, the government announced some changes to the income tax threshold that can affect how you pay your taxes. Our tax specialists in London and Walsall will walk you through the changes.
Changes in UK Income Tax Threshold
Your profits from self-employment and earnings from employment are liable for income tax. Those who get benefits from pension and inheritance, or earn through rental properties, investments, etc., also pay this tax. Let’s take a look at different tax bands and what changes have been made.
Personal Allowance
If you earn £12,570 or less a year, you don’t have to pay any income tax to the government. According to recent announcements, Chancellor Jeremy Hunt will freeze the personal allowance tax band until April 2028.
Basic Allowance
Once your income surpasses £12,570 but is less than £50,270 per year, you have to pay 20% of this amount as income tax. So a fifth of your earnings go to the government. With the new changes, the government has frozen the threshold of £12,570–£50,270 until 2028.
Higher Rate
The higher rate of income tax is 40% and is applied to those individuals who earn between £50,271 and £150,000. As per the new changes, people earning between £50,271 and £125,140 will be liable for a higher income tax rate. This means more people have to pay this rate.
Additional Rate
The government has announced an additional rate of income tax of 45% on those individuals who earn more than £150,000 a year. In April 2023, people earning more than £125,140 a year will have to pay the additional rate.
National Insurance
Natural Insurance is similar to income tax and is levied on earnings. The latest changes have confirmed that the main NI threshold will remain frozen until 2028.
We understand that taxes can be confusing, even more so with the new changes. Therefore, At IBISS & CO, we offer a wide range of services to simplify taxes for businesses and individuals in London and Walsall.
Our team includes income tax advisors, property tax specialists, and tax accountants. If you have any confusion regarding the updated income tax threshold in the UK, you can reach out to us.
