Income tax rates
From 6 April 2023, the point at which individuals pay the additional rate will be lowered from £150,000 to £125,140.
The income tax personal allowance and higher rate threshold were already fixed at their current levels until April 2026 and will now be maintained for an additional two years until April 2028. They will be £12,570 and £50,270 respectively.
Fixing the personal allowance and higher rate threshold effectively increases tax over the years without actually putting up the rate. As inflation and individuals incomes increase, more of their income falls into tax and higher rate tax. This generates more tax revenue for HMRC, without them actually saying taxes are increasing, but really they are.
Reduction in the Dividend Allowance
The government will reduce the Dividend Allowance from £2,000 to £1,000 from April 2023 and to £500 from April 2024.
The dividend allowance is a tax free amount an individual can earn in dividends each year.
The dividend tax rates from April 2023 will be as follows:
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Basic rate – 8.75% – earnings between £12,571 to £50,270
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Higher rate – 33.75% – earnings between £50,271 and £125,140
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Additional rate – 39.35% – earnings over £125,141
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