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2023 Tax rates and bands update
It’s a new tax year, so what does that mean for our hard earned pennies?
Income Tax Rates and Bands
Scotland has had different tax rates and bands with the rest of the UK since April 2018. If you reside in Scotland you will be a Scottish Tax payer and your tax code will begin with an S.
The basic and intermediate rates and bands have remained unchanged from last year, however the higher and top rate tax bands have changed along with the rates from 6 April 2023.
The new Tax Rates and Bands for 2023/24 are as follows: –
| Band | Rate | |
| Starter Rate | £12,571* – £14,732 | 19% |
| Basic | £14,733 – £25,688 | 20% |
| Intermediate | £25,689 – £43,662 | 21% |
| Higher | £43,663 – £125,140** | 42% |
| Top | Over £125,140 | 47% |
*The Standard Personal Allowance is £12,570, if you are in receipt of the full allowance you will begin paying income tax on anything over this amount.
**When an individual earns over £100,000 their Personal Allowance will be reduced by £1 for every £2 earned over this amount. If an individual earns £125,140, they will have their allowance reduced to zero and they will be required to submit an annual tax return.
Savings and Dividend Allowances
The savings allowance has remained unchanged. Basic rate tax payers are entitled to £1,000 savings allowance on all interest received and £500 for higher rate taxpayers. However the dividend allowance which was £2,000 in the 2022/23 tax year has reduced to £1,000 in the 2023/24 tax year. It will be halved again in 2024/25 to £500. The rate in which dividends are taxed remain the same at 8.75% for basic rate tax payers, 33.75% for higher rate tax payers and for top rate tax payers the rate will be 39.35%.
Capital Gains Tax
Capital Gains tax allowances have also been reduced. The allowance had remained at £12,300 since April 2020, however this has now been reduced to just £6,000 the consequences of this reduction is more people will now be required to pay tax on the sale of shares, certain investments and second homes. The tax rate remains the same, 10% for basic rate tax payers, 20% for higher rate and above and an additional 8% is added to the 10% and 20% rates on the sale of residential properties. Therefore CGT for the sale of residential property is 18% if you are a basic rate tax payer and 28% if you are a higher rate and above tax payer.
Pension Relief
The Lifetime Allowance (LTA) previously limited the overall amount you could pay into your pension pot, this limit was £1,073,100. From 6 April 2023 this Lifetime Allowance has been abolished completely.
Paying into your pension each year can also benefit an individual by way of tax relief, this was previously limited to £40,000 per year, this has now been increased to allow an individual to save up to £60,000 into their pensions and still benefit from the tax relief. If you would like to know how these changes could affect you please contact Arlene Robertson our Law Accountant on 01224 332400.
