Tax Rates and Allowances for 2023/24
The clocks have gone forward, the daffodils are out and Spring is in the air…which also means the new tax year is upon us!
Here are the main personal tax rates and allowances for the 2023/24 tax year. These dictate how much you earn before you pay tax, and the rate of tax you pay.
What is my personal allowance?
Your personal allowance is how much you can earn before you start paying income tax. If you earn less than £100,000 this is staying at £12,750 for the 2023/24 tax year.
If you earn between £100,000 and £125,000, the personal allowance decreases by £1 for every £2 you earn above £100,000 until it reaches £0, after which you don’t have a personal allowance.
Anything you earn over your personal allowance is subject to income tax.
What rate of tax will I pay?
How much income tax you pay depends on which tax band you fall into. For the 2023/24 tax year, these are as follows:
- Taxable income up to £37,700 = 20% (Basic Rate)
- Taxable income from £37,701 to £125,140 = 40% (Higher Rate)
- Taxable income above £125,140 = 45% (Additional Rate)
If you live in Scotland, the tax bands are slightly different, click here for further information.
Annual Pension Allowance for 2023/24
One of the few good news stories to come out of the Chancellor’s March Budget was a shake up of pension allowances, allowing personal pension savers to put more in their pension pot before getting taxed on it.
From 6th April 2023, the annual allowance for tax relief on pension savings in a registered pension scheme is set to increase from £40,000 to £60,000. Additionally, the lifetime allowance will be abolished.
Depending on your tax band, you get a certain percentage of tax relief on your pension contributions, up to the new annual threshold:
- Basic rate: 20%
- Higher rate: 40%
- Top rate: 45%
Anyone who has a salary sacrifice pension may want to review their arrangement to take advantage of the changes to pension allowances.
If you are a Liquid Friday contractor and would like to discuss making changes to your existing salary sacrifice pension, or for help setting one up, please get in touch with the team on 02392 883300.