We wanted to give you an update on personal tax following the Spring Budget in March 2022. It’s important to be aware of any changes that can impact your tax and to take advantage of any allowances available to you.
The personal allowance is currently £12,570 and will be frozen at £12,570 for the tax years to 2025/26.
However, for anyone with an ‘adjusted net income’ over £100,000, there is a reduction in the personal allowance. The reduction is £1 for every £2 of income above £100,000. It’s important to note there is no personal allowance where adjusted net income exceeds £125,140.
Marriage Allowance lets you transfer £1,260 of your Personal Allowance to your husband, wife, or civil partner. This reduces their tax by up to £252 in the tax year (6 April to 5 April the next year).
To benefit as a couple, the lower earner must normally have no income or an income below your Personal Allowance - this is usually £12,570.
If you have not claimed marriage allowance before it is possible to claim for the four years back to 2018/19 where the entitlement conditions are met. The total tax saving for all years up until 2022/23 could be over £1,000. A claim for 2018/19 will need to be made by 5 April 2023.
The bands of tax are also frozen for the tax years to 2025/26.
The Savings Allowance applies to savings income and the available allowance in a tax year depends on the individual’s marginal rate of income tax. Broadly, individuals taxed at up to the basic rate of tax have an allowance of £1,000. For higher rate taxpayers the allowance is £500. No allowance is due to additional rate taxpayers.
Some individuals qualify for a 0% starting rate of tax on savings income up to £5,000. However, the rate is not available if taxable non-savings income exceeds £5,000.
The first £2,000 of dividends are chargeable to tax at 0% (the Dividend Allowance). For 2022/23 and subsequent tax years the rate at which dividends received above the Dividend Allowance are taxed has increased across all rates by 1.25% to the following rates:
Dividends within the allowance still count towards an individual’s basic or higher rate band and so may affect the rate of tax paid on dividends above the Dividend Allowance. To determine which tax band dividends, fall into, dividends are treated as the last type of income to be taxed.
We hope you found this article useful. If you have any questions regarding personal tax, please do contact us by calling 01623 490 120 or by email at This email address is being protected from spambots. You need JavaScript enabled to view it.
Haidee is our Personal Tax Director and is a fully qualified tax adviser, having achieved the ATT qualification in 2006. Tax efficiency being her main concern. Specialising in taxation, Haidee provides clients with advice on personal tax, PAYE services, VAT and social security. She also provides guidance to new start-up businesses.
Call us today on01623 490120
or email info@watsonk.co.uk
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