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Advice from Wisbech accountants on rates and thresholds for the new tax year

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Here's the fortnightly Barwell's Banter column by Nickie Barwell, of Barwell Accountants in Wisbech...

The tax year 2022/23 is now upon us and hence new tax rates and rules have come into force. However, from April 6 just gone there will be less changes than in previous years, with many rates and thresholds frozen.

Our individual personal allowance (amount each person can earn tax free) will remain at £12,570 per year (£1,047.50 per month; £241.73 per week).

The tax year 2022/23 is now upon us
The tax year 2022/23 is now upon us

Earnings up to the basic rate tax band of £37,700 are taxed at 20%, earnings which fall between £37,701 and £150,000 are taxed as the higher rate band of 40%. Whilst earnings over £150,000 are taxed at the additional tax rate of 45%.

The transferrable marriage allowance stays at £1,260, while the blind person’s allowance is increased slightly to £2,600.

National insurance is going to see more change though, as from April 6 to April 5, 2023 National insurance contributions will increase by 1.25 % (which will be spent on the NHS, health and social care). This increase will apply to:

lClass 1 (paid by employees);

lClass 4 (paid by self employed);

lSecondary Class 1, 1A and 1B (paid by employers).

From April 2023 the health and social care levy element will be separated out from other national insurance contributions so that employees will be able to see the exact amount paid in this regard.

Sitting alongside this national insurance rise is an increase of the dividend tax rate. It increased to 8.75% (previously 7.5%) from April 6 for dividends that fall within the basic rate band.

Likewise, it increases to 33.75% for dividends falling within the higher rate band and 39.35% for dividends at the additional rate.

The rate at which directors’ overdrawn loan accounts are taxed will also be subject to the 1.25% increase, as the rate will go up to 33.75%. The £2,000 dividend allowance remains and dividends received by ISAs remain tax free.

The 2022/2023 thresholds for plans 2 and 3 student loans have been frozen at their 2021/2022 levels of £27,295 and £21,000 respectively. The rate of repayment of 9% remains unchanged.

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