It’s been a year of change, with three Prime Ministers, three Budgets, roaring inflation and a cost-of-living crisis, so it might be worth reflecting on upcoming tax and pension changes.
The only material change to tax bands in the new year is for the people in the additional rate tax bracket where the threshold for the 45 per cent tax band will fall from £150,000 to £125,140 from April 2023.
The basic rate (20 per cent) and the higher rate (40 per cent) thresholds remain the same.
The additional rate change is expected to pull a quarter of a million more people into the top rate of taxation.
However, as the Personal Allowance has been frozen at £12,570 until 2028 and inflation is driving wage increases, it is likely that taxpayers from lower bands will be pushed into higher ones in the years to come.
Capital Gains Tax
Capital Gains Tax (CGT) is a tax on the gains made on the disposal of assets. The gain obtained in excess of the personal CGT exemption is taxed.
This exemption will be reduced from £12,300 to £6,000 from April 2023, and then to £3,000 from April 2024.
Stamp Duty Land Tax
The basic amount at which you pay Stamp Duty Land Tax (SDLT) has doubled from £125,000 to £250,000.
The threshold for first-time buyers has also increased from £300,000 to £425,000 and the maximum value of a property on which first-time buyers’ relief can be claimed has also increased from £500,000 to £625,000.
This will remain in place until 31 March 2025 and only apply in England and Northern Ireland, as property is taxed differently in Scotland and Wales.
Pension Annual Allowance
The allowance is the total amount that you, your employer and any third party can pay across all your pension plans in any given tax year.
The standard Annual Allowance is currently £40,000 and above this figure, you could be taxed. It will now remain at £40,000 until 2028 as part of the tax freeze.
The State Pension will rise by 10.1 per cent from April 2023 and those receiving Pension Credits will also see an increase of the same amount.
This will mean pensioners on the lowest incomes are protected from inflation and don’t lose some of their State Pension increase in the Pension Credit means test.
The Government will provide households on means-tested benefits with an additional £900 cost-of-living payment in 2023-24.
Pensioner households will get an additional £300 and individuals on disability benefits will get an additional £150 in 2023-24.
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