Personal Tax

The personal allowance

The income tax personal allowance was already fixed at the current level until April 2026 and will now be maintained for an additional two years until April 2028 at £12,570.

The government will uprate the married couple’s allowance and blind person’s allowance by inflation for 2023/24.

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

The marriage allowance permits certain couples, where neither party pays tax in the tax year at a rate other than the basic rate (or intermediate rate in Scotland), to transfer £1,260 of their personal allowance to their spouse or civil partner.

Comment

The marriage allowance reduces the recipient’s tax bill by up to approximately £250 a year. To benefit from the marriage allowance one spouse or civil partner must normally have no income or income below the personal allowance for the year. Since the marriage allowance was first introduced there are couples who are entitled to claim but have not yet done so. It is possible to claim for all years back to 2018/19 where the entitlement conditions are met. The total tax saving for all years up until 2022/23 could be over £1,000. A claim for 2018/19 will need to be made by 5 April 2023.

Tax bands and rates

The basic rate of tax is 20%. In 2023/24 the band of income taxable at this rate is £37,700 so that the threshold at which the 40% band applies is £50,270 for those who are entitled to the full personal allowance.

Once again, the basic rate band is frozen at £37,700 up until April 2028. The National Insurance contributions upper earnings limit and upper profits limit will remain aligned to the higher rate threshold at £50,270 for these years.

From 6 April 2023, the point at which individuals pay the additional rate will be lowered from £150,000 to £125,140.

The additional rate for non-savings and non-dividend income will apply to taxpayers in England, Wales, and Northern Ireland. The additional rate for savings and dividend income will apply to the whole of the UK.

Scottish residents

The tax on income (other than savings and dividend income) is different for taxpayers who are resident in Scotland from that paid by taxpayers resident elsewhere in the UK. The Scottish income tax rates and bands apply to income such as employment income, self-employed trade profits and property income.

In 2023/24 there are five income tax rates which range between 19% and 47%. Scottish taxpayers are entitled to the same personal allowance as individuals in the rest of the UK. The two higher rates are 42% and 47% rather than the 40% and 45% rates that apply to such income for other UK residents. For 2023/24, the 42% band applies to income over £43,662 for those who are entitled to the full personal allowance. The 47% rate applies to income over £125,140.

Welsh residents

Since April 2019, the Welsh Government has had the right to vary the rates of income tax payable by Welsh taxpayers (other than tax on savings and dividend income). The UK government has reduced each of the three rates of income tax paid by Welsh taxpayers by 10 pence. For 2023/24 the Welsh Government has set the Welsh rate of income tax at 10 pence which has been added to the reduced rates. This means the tax payable by Welsh taxpayers is the same as that payable by English and Northern Irish taxpayers.

Rendering void assignments of income tax repayments

This measure will apply to individuals entitled to income tax repayments from HMRC who wish to use a business, accountancy firm or agent to facilitate their access to a repayment. It will also affect the facilitating businesses, accountancy firms and agents.

It will remove a taxpayer’s ability to legally assign to a third party their income tax repayment, or their right to an income tax repayment. The effect of this is that assignments of income tax repayments will have no legal effect and the repayment will remain the property of the taxpayer.

This will affect assignments of which notice is received by HMRC on or after 15 March 2023.