The days are longer, it’s brighter outside (hopefully!) and it’s time to embark on a good spring clean to refresh, organise and bring a sense of wellbeing – a notion well worth extending to your finances.
Although there’s limited change in the structure and operation of the taxation of UK individuals in the 2022/23 tax year, this ‘no change’ component is significant – the big tax freeze is here.
Excluding the 1.25 percentage point increase to National Insurance and Dividend Tax rates from April 2022, and an increase in the National Insurance threshold to £12,570 from July, most major tax rates, bands and allowances were frozen until 2025/26, in the Spring 2021 Budget.
Stealth mode
Frozen allowances can really impact; estimates suggest that by 2025 there may be five million higher rate taxpayers, a massive 900,000 increase1. As another example, frozen allowances, growth in assets and accumulation of unspent income could see people falling into the Inheritance Tax (IHT) net.
Know your numbers
The good news is that effective tax planning strategies can help shield you from the chill this spring. Some key allowances for the new tax year (2022/23) include:
– Individual Savings Account (ISA) allowance remains at £20,000
– Junior Individual Savings Account (JISA) allowance and Child Trust Fund (CTF) annual subscription limit remain at £9,000
– Inheritance Tax (IHT) nil-rate band remains at £325,000 and the residence nil-rate band at £175,000, until April 2026
– Capital Gains Tax (CGT) annual exemption remains at £12,300 for individuals and £6,150 for most trusts
– Lifetime Allowance for pensions remains at £1,073,100 until April 2026; the Annual Allowance remains at £40,000
– New single-tier State Pension increased to £185.15 per week in April 2022, the older basic State Pension increased to £141.85 per week.
1IFS, 2021
It is important to take professional advice before making any decision relating to your personal finances. Information within this article is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK.