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Increasing the National Insurance tax threshold
The threshold at which National Insurance is paid was raised by £3,000, to £12,570, aligning it with the personal allowance for income tax. This means those earning up to £12,570 will pay no income tax or National Insurance.
This will mean that despite the National Insurance rate increase of 1.25% with the threshold increase employees and the self-employed with income up to about £38,000 will not find their net income reducing. But of course, the issue of cost of living and energy price rises will mean in spending terms all will feel worse off.
Increasing dividend tax rate
In addition to the National Insurance rate increase, the dividend tax rate is also rising by 1.25% for the next tax year. These increases are to support the ongoing funding issue of health and social care. Pensioners who rely on investment income to supplement their income are likely to feel the impact of the dividend tax rate increase.
Measures to address the energy crisis
The Chancellor also introduced three measures to address the energy cost issue, with a 5p per litre reduction in fuel duty, 5% vat rate introduced for energy saving materials and finally, support for vulnerable households.
Rishi finished the statement with a flourish, a cut in the basic rate of income tax, from 20% to 19%. Not to be introduced for the next tax year, but something to look forward to in the 2024/25 tax year.
If you would like to find out more about any of the areas outlined above or are interested in receiving some advice, please don’t hesitate to contact your financial adviser.
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Inheritance Tax planning
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Past performance is not a guide to future performance and may not be repeated. Investment involves risk.
The value of investments and the income from them may go down as well as up and investors may not get back any of the amount originally invested. Because of this, an investor is not certain to make a profit on an investment and may lose money. Exchange rate changes may cause the value of overseas investments to rise or fall.
This communication is for information purposes only and is based on our understanding of current UK tax legislation and HM Revenue and Customs (“HMRC”). Levels and bases of taxation and reliefs are subject to change and their value to you will depend on your personal circumstances. Nothing in this communication constitutes financial, professional or investment advice or a personal recommendation.
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