We have reviewed the primary tax exemptions and allowances, and summarised what has, or hasn’t, altered for the tax year ahead.
Personal Allowance
The personal allowance, which denotes earnings that are not taxable, remains unchanged at £12,570 for the year ahead. The basic rate stays at 20%, while the higher-rate threshold, at which the tax rate increases to 40%, is £50,270, and both will remain frozen until 2028. The additional-rate tax threshold, where the tax rate becomes 45%, is set at £125,140.
Income Tax
All three income tax rates for England and Wales are unchanged from 2022/23.
| Tax Band | 2023/24 |
| Basic - 20% | £37,700 |
| Higher - 40% | £125,140 |
| Additional - 45% | £125,141+ |
Scottish Income Tax rates:
| Tax Band | 2023/24 |
| Starter Rate - 19% | £12,571 - £14,732 (£2,162) |
| Basic Rate - 20% | £14,733 - £25,688 (£10,956) |
| Intermediate Rate - 21% | £25,689 - £43,662 (£17,974) |
| Higher Rate - 42% | £43,663 - £125,140 |
| Top Rate - 47% | £125,141 and above |
National insurance contributions
National Insurance contributions (NICs) will be frozen until 2028.
| National Insurance Contribution | Employee | Employer |
| NICs Rate | 12% | 13.8% |
| No NICs for employees on the first | £242pw | £175pw |
| No NICs for employees* on the first | £242pw | £967pw |
| NIC rates charged up to | £967pw | No Limit |
| 2% NICs on earnings over | £967pw | N/A |
* No employer NICs on the first £967pw for employees generally under 21 years, apprentices under 25 years and veterans in first 12 months of civilian employment. No employer NICs on the first £481pw for employees at freeports and investment zones in Great Britain in the first three years of employment
ISA’s
The tax-efficient ISA allowance for both Stocks & Shares ISAs and Cash ISAs remains at £20,000 for 2023/24. However, interest rates for Cash ISAs, though having increased, are still lower than inflation, thus eroding the real value of savings.
The Junior ISA annual allowance remains unchanged at £9,000 and is a great way to give children or grandchildren a financial head start.
Capital Gains Tax (CGT) has undergone significant changes with the CGT allowance being cut to £6,000 in 2023/24 and then to £3,000 from April 2024.
Inheritance Tax (IHT)
the nil-rate band remains at £325,000 and the additional residence nil-rate band is fixed at £175,000 until 2028.
Changes to Corporation Tax
Corporation Tax rate is set to rise to 25% for the year 2023/24, except for businesses with £50,000 profit or less, which will remain at 19%, and those with profits between £50,000 and £250,000, which will have a marginal taper.
Changes to Dividend and Savings income
Basic-rate taxpayers can still receive up to £1,000 in interest on their savings without paying taxes in 2023/24, through the Personal Savings Allowance. The allowance for higher-rate taxpayers remains at £500, while additional-rate taxpayers have no allowance.
However, significant changes have occurred in Dividend Tax, with the dividend allowance reduced from £2,000 to £1,000 in 2023/24 and further to £500 in April 2024. Shareholders or individuals receiving dividends from funds or investment trusts are likely to be affected by this change.
2023/24 Tax rate bands above the allowance:
| Tax Band | % |
| Basic | 8.75 |
| Higher | 33.75 |
| Additional | 39.53 |
It is advisable to discuss all of these changes with a Financial Planner to ensure that you are making the most of all your allowances this year.
The content of this article is for your general information only and is based upon our understanding of current Tax legislation. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts and their value depends on the individual circumstances of the investor.
The Financial Conduct Authority does not regulate Tax Advice.