UK tax rates and allowances 2023
The tax rates and personal allowances for the 2023/24 tax year which starts on 6 April 2023.
Planning your finances effectively can be a great way to reduce your overall tax bill. You’ll need to be aware of all the relevant UK tax rates and allowances.
From income tax bands to capital gains tax and the marriage allowance, find out all the rates and allowances you need to be aware of for the 2023/2024 tax year (which starts on 6 April) with our round-up.
What are the personal allowances for 2023/24
The personal allowance is the amount of money you can earn or receive each year before you will need to start paying income tax.
You might get a higher personal allowance if you are blind, or eligible for the marriage allowance. Alternatively your personal allowance may be reduced if you earn more than £100,000.
If you are registered blind your personal allowance will be boosted by the blind person’s allowance. If it exceeds the value of your income it can be passed over to a spouse if you’re married or in a civil partnership.
|Blind person's allowance||£2,600||£2,800|
|Transferrable personal allowance||£1,260||£1,260|
If you earn less than the personal allowance (£12,570) you may be able to transfer £1,260 of it to a higher earning spouse or civil partner. To be eligible, the higher earner must pay the basic rate of tax. This can save qualifying married couples £252 each year.
The married couple's allowance for 2023/24
If you or your spouse were born before 6 April 1935 you may be eligible for the married couple’s allowance. This reduces income tax payments by 10% of the allowance. Pensioners on higher incomes may not get the full married couple's allowance. In 2022/23 this gave eligible claimants a reduction to their tax bill of between £364 and £941.50 a year.
|Maximum married couple's allowance||£9,415||£9,415|
|Minimum married couple's allowance||£3,640||£3,640|
The personal savings allowance for 2023/24
The savings allowance you get is determined by the rate of income tax you pay.
|Tax band||Personal allowance|
|Additional rate||No allowance|
Your personal allowance can also incorporate savings interest if it hasn’t been used for other income such as earnings.
Interest on cash ISAs doesn’t count towards the personal savings tax allowance, as all ISA gains are paid tax-free.
What are the income tax rates for 2023/24
Income tax applies to your work-related earnings and income from pensions, rental properties, savings and some state benefits. If you earn more than £1,000 a year from a side-hustle, that could be subject to income tax too.
The amount of tax you pay is linked to your total income over the year. But you only pay your highest rate of income tax (known as your marginal rate) on the amount you earn over the relevant threshold, not on your total income.
UK income tax rates for the 2023/24 tax year
|Income tax band||Taxable income||Tax rate|
|Personal allowance||Up to £12,570||0%|
|Basic rate||£12,571 - £50,270||20%|
|Higher rate||£50,271 - £125,140||40%|
|Additional or top rate||Over £125,140||45%|
The key change from the 2022/23 tax year is that the threshold for the top rate of tax has been dropped from £150,000 to £125,140 – the level of earnings at which the personal allowance is lost.
These UK tax thresholds have also been frozen until the April 2028.
If you’re employed, income tax will be deducted from your salary via Pay as You Earn (PAYE). However, if you are self-employed or have other sources of income that aren’t taxed, you’ll need to complete a self-assessment tax return.
Different income tax rates and bands apply in Scotland.
Scottish income tax rates and bands for 2023/24
|Income tax band||Taxable income||Scottish tax rate|
|Personal allowance||Up to £12,570||0%|
|Starter||£12,571 - £14,732||19%|
|Basic||£14,733 - £25,688||20%|
|Intermediate||£25,689 - £43,662||21%|
|Higher||£43,663 - £125,140||42%|
The key change from the 2022/23 tax year has also been the reduction of the threshold for the top rate of tax from £150,000 to £125,140.
National insurance contributions
If you earn an income from employment or self-employment you’ll need to pay national insurance contributions. These payments will help build your entitlement to certain benefits including the state pension and maternity benefits.
NIC rates for 2023/24
- Class one NICs (paid by employees) will be charged at a rate of 12% on income between the lower and upper limits of £123 and £967 a week. 2% is charged on earnings over the upper limit.
- Class 2 NICs (paid by the self-employed) will be charged at a rate of £3.45 a week once you earn more than £6,725 a year.
- Class 3 NICs are voluntary contributions designed to plug gaps in the state pension. These will cost £17.45 a week.
- Class 4 NICs are paid by higher earning self-employed workers. It is paid at a rate of 9.73% on profits between the lower and upper thresholds of £12,570 and £50,270. Profits over this threshold are charged at 2.73%.
In addition to tax on your income there may also be tax to pay on your investments and other assets.
This is a tax charged on dividends you earn from shares. This could include direct shares you hold or collective investments, like funds, that invest in shares. The amount you pay depends on the rate of income tax that you pay.
|Tax band||Dividend tax rate|
However, you can earn some divided income before tax is charged. Dividend income can be included in your personal allowance and once that has been reached there is also an additional dividend allowance.
- In 2023/24 the dividend allowance is £1,000. (This is down from £2,000 in 2022/23 and will be reduced again to £500 in April 2024)
You’ll need to declare dividends and pay any tax that is due with a self-assessment tax return.
Shares held in a tax-free wrapper like an ISA or pension will not be subject to dividend tax and do not need to be mentioned on a tax return.
Capital gains tax
When you sell or dispose of an asset that has gone up in value during the time you owned it you may have to pay tax on your gains.
This can include investments like shares and funds, as well as high-value items like antique furniture, artwork and jewellery. It includes property too, but your main home is exempt.
The amount of CGT that you pay is dependent on the rate of income tax you pay as well as the asset you are selling.
|Tax band||Capital gains tax rate|
|Basic rate||10% or 18% for property|
|Higher rate||20% or 28% for property|
|Additional rate||20% or 28% for property|
However, each year you can take advantage of a capital gains tax allowance, known officially as the annual exempt amount.
- In 2023/24 the CGT allowance is £6,000 (this is down from £12,300 in 2022/23. The allowance will fall again in 2024 to £3,000).
You can report capital gains to HMRC directly through its real time service or in your self-assessment tax return.
Inheritance tax (IHT)
IHT is charged when an individual dies and leaves an estate that is worth more than the tax-free allowance.
- The rate of IHT in 2023/2024 is 40%
- In 2023/24 everyone has an IHT allowance of £325,000 which can be boosted by a further £175,000 if a family home is being passed on to children or grandchildren.
Importantly, your allowance can be passed on to a spouse or civil partner when you die. This means a couple passing on their home can leave an estate worth £1m before any IHT will be payable.
What are the saving and investment allowances for 2023/24
It is possible to shelter a certain amount of your savings and investments from tax each year using ISAs and pensions. However, tax benefits will be limited by an annual allowance each year.
Saving and investing allowances for 2023/24
Junior ISA: £9,000
Child trust fund (CTF): The CTF scheme closed in 2011, but anyone with an account still running can pay in up to £9,000.
Pensions: You can save 100% of your earnings up to a limit of £60,000 into any number of pensions each year.
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Risk Warning: The price and value of investments and their income fluctuates: you may get back less than the amount you invested. If you are unsure about the suitability of a particular investment or think that you need a personal recommendation, you should speak to a suitably qualified financial adviser. Please note, the tax treatment of these products depends on the individual circumstances of each customer and may be subject to change in future. If you are uncertain about the tax treatment of the products you should contact HMRC or seek independent tax advice.