Autumn Budget Update: Personal Taxes - What You Need to Know

There's a lot to digest from this year's Autumn Budget, but one of the most important changes for personal tax is the lowering of the Additional Rate threshold to £125,140. This means that more people will be affected by the higher rate of tax, (45%), as well as changes to income tax and National Insurance. To help you understand these changes, read on for a quick overview!

Additional rate (45%) threshold lowered to £125,140

If you're earning above the new additional rate threshold of £125,140, you'll need to start paying an additional 45% on your income tax bill. This is also the point at which you will completely lose your tax-free personal allowance of £12,570. In order to avoid this, take some time to review your income and tax situation and plan ahead. Taking non-cash employee benefits, investing in your pension or making charitable donations through gift aid can lower your tax bill. Last but not least, make sure to file your tax returns on time to avoid any penalties or interest charges.

Income tax & National Insurance fixed

During the Autumn Budget, Jeremy Hunt made it clear there is a freeze on the personal allowance, basic and higher rate tax band. This will result in millions more people paying taxes at potentially higher rates. Generally, tax bands and allowances will increase in line with inflation, however, as the bands are frozen and wages are on the rise, more of that extra money will be taxed.

Dividend allowance lowered to £1,000

One of the topics that business owners and investors will be concerned about is the government's recent decision to lower the dividend allowance to £1,000 in April 2023. This change will have a significant impact on those who receive dividends, as well as those who are withdrawing money from their limited company. A further decrease to £500 is planned for April 2024.

Capital gains allowance lowered to £6,000

Starting from April 2023, the capital gains allowance will be lowered to £6,000. This means that if you sell any assets for a gain of more than £6,000 within a single year, you will have to pay capital gains tax. There are reliefs for your primary residence, (property you live in), so this will likely affect investors. Keep in mind that this allowance is only applicable to UK residents, so may not affect all countries.

A quick summary

The U-turn from the October tax cuts was certainly expected after the resulting market reaction and the couple years of Government spending we’ve had. However, at a time where the cost of living has risen too, it's important to claim back what you can - especially if you’re filing a personal tax return.