On the 23rd of March 2022, Chancellor Sunak announced the tax rates and bands for the next tax year (2022/23). These include an income tax cut by 1p for most taxpayers. However, this will not be taking place until 2024. 

The following sections highlight the Personal Tax allocation in the Spring Budget on personal tax: 

Personal Allowance.

The personal allowance is currently £12,570. This will be frozen at the same value for the following tax years until 2025/26. For those with an ‘adjusted bet income’ over £100,000, they will have to pay £1 for every £2 of income above £100,000.

There will be no personal allowance where adjusted net income exceeds £125,140.

Marriage Allowance. 

As you may be aware, the marriage allowance was first introduced in the tax year of 2015/16. This reduces the recipient’s tax bill by nearly £250 a year. However, not many couples are aware that they are entitled to claim this allowance – it is possible to claim four years back to 2018/19. You must make these claims before the 5th of April 2023.

The total tax saving for all years until the new tax year (2022/23) could be over £1,000. To benefit from a marriage allowance, one spouse or civil partner must have no income or an income below the personal allowance for the year. Marriage allowance lets qualifying couples transfer £1,260 of their personal allowance to their partner.

Tax Bands and Rates.

Chancellor Sunak announced that the tax bands will be frozen for the years until 2025/26. The introductory rate of tax is now 20%. Starting this tax year, the band of income taxable is £37,700. Therefore, the threshold at which the 40% band applies is £50,270 for those who qualify for a full personal allowance. 

Individuals with an income over £150,000 pay tax at a rate of 45%. 

Scottish taxpayers have five income tax rates which range between 19% and 46%. The introductory tax rate is 20%, and there is an additional intermediate rate of 21%. For this tax year, the threshold that 41% band applies is £43,663 for those who qualify for the personal allowance. 

The Welsh Government has set the Welsh income tax rate at 10p, which will be added to the reduced rates. This means that Welsh taxpayers pay the same as English and Northern Irish taxpayers. 

Tax on Savings Income

Saving income is basically income such as bank and building society interests. The available tax allowance will apply to savings income depending on the individual’s marginal income tax rate. Individuals who pay the introductory tax rate have an allowance of £1,000. For higher rate taxpayers, they will have an allowance of £500. There will also be individuals who are entitled to a 0% starting rate of tax on savings income up to £5,000. Yet, this rate becomes unavailable after savings income exceeds £5,000.

Tax on Dividends

The first £2,000 of dividends are free of tax thanks to the Dividend Allowance. However, the taxable dividend that is above the dividend allowance has a 1.25% increase for the following: 

• 8.75% for basic rate taxpayers
• 33.75% for higher rate taxpayers 
• 39.35% for additional taxpayers.

Don’t hesitate to contact us for more information on the Spring Budget 2022 and personal tax.