Tax Allowance Changes Coming in April 2023

23/12/2024

The new tax year is bringing with it some significant changes to tax allowances. A summary of them can be found in the table below:

The impact of the above can be explained below:

Annual Exempt Amount – Capital gains tax (CGT) is charged on the profits you make from selling an asset, such as a second property or taxable investments.

The tax-free allowance (known as the Annual Exempt Amount) is £12,300 for 2022-23, but from April this will be dramatically cut to £6,000. From April 2024, it will be reduced again to just £3,000.

Dividend Allowance – From 6 April, the dividend allowance will also be cut from £2,000 to £1,000. From April 2024, it will be reduced to £500. This means if you receive dividends either from taxable investments or via a limited company you will likely pay more tax.

Additional Rate Income Tax – Currently you have to earn over £150,000 before you are taxed at 45%. However the new tax year will bring a reduction of this to £125,140

It’s estimated around 250,000 taxpayers will be pushed into this higher tax band, paying 45% tax on any income above the new limit.

Lowering the additional rate means someone earning £150,000 will pay an extra £1,200 income tax per year.