On 23rd March 2022, the Chancellor of the Exchequer Rt Hon Rishi Sunak released the Spring Statement. This statement has a lot to unpack, especially regarding earnings and savings, so here’s a quick breakdown of what was discussed.
There were no changes to pension tax relief.
The lifetime allowance remains frozen at £1,073,100 until April 2026.
In recent years, State Pensions have been uprated each year by the higher of CPI, 2.5% and the average increase in earnings – known as the ‘triple lock’. For the tax year 2022/23, the earnings element has been suspended which means that, in 2022/23, State Pensions will increase by 3.1% (the September 2023 CPI figure).
The 2022/23 annual subscription limits for adult and junior ISAs will remain at £20,000 and £9,000 respectively.
In England, Wales, and Northern Ireland, the basic rate of income tax will fall from 20% to 19% from April 2024. This will apply to both non-savings and savings income. The trust rate will also reduce to 19% for the first £1,000 of income (the standard rate band).
It was confirmed that the rate of tax for dividends will increase by 1.25% as part of the measures to fund social care reforms. The new dividends rates for individuals will be;
The rate for trustees will be 39.35% on amounts in excess of the trust’s standard rate band.
The dividend allowance available to individuals remains unchanged at £2,000.
The personal allowance and basic rate band will be frozen at £12,570 and £37,700 respectively until 2025/26. This means that the higher rate tax threshold will remain at £50,270 for those entitled to a full personal allowance.
A 1.25% increase in National Insurance to help pay for social care reforms is to go ahead as planned from 2022/23. This will apply to employees, employers and the self-employed. From 2023/24 it is intended that the 1.25% rise will become a separate standalone levy.
The thresholds at which employees and the self-employed will start to pay National Insurance will be brought in line with the annual personal allowance of £12,570 from July 2022.
From April the self-employed will not have to pay class 2 flat-rate National Insurance contributions if their profits are below £9,880, with the lower profits limit rising to £12,570 from July.
Capital Gains Tax
As previously announced, the annual exempt amount for capital gains tax is to remain frozen at £12,300 for individuals and personal representatives until 2025/26. The exempt amount for trustees of settlements is to remain frozen at £6,150.
Both the nil-rate band and residence nil rate band are to remain fixed at £325,000 and £175,000 respectively until April 2026.
Corporation Tax is still set to rise to 25% from April 2023 for most companies. Small companies, with profits below £50,000, will continue to pay tax at the current rate of 19%. There will also be a reintroduction of tapering relief for businesses with profits under £250,000.
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