As a new tax year has started, it is worth keeping in mind for both the Scottish and UK Governments respectively, there have been changes in the rates to which tax is levied and changes enacted to income band thresholds, tax-free allowances, and pensions allowances, which may affect your circumstances. The following applies as from 6 April 2023:
- The Scottish rates of income tax for higher rates and the top rate have increased by 1 percentage point to 42% (from 41%) and 47% (from 46%) respectively;
- The income threshold from which the top/additional rate of tax applies has decreased to £125,140, down from £150,000;
- The dividend allowance has decreased to £1,000, down from £2,000; and
- The annual exempt amount for capital gains tax has decreased to £6,000, down from £12,300.
The inheritance tax nil rate band threshold remains frozen at £325,000 until 2028. This has been fixed since 2009, meaning more and more estates are coming into charge of the inheritance tax rate of 40% where this band is exceeded. Now may be a good time to think about the effects of the impact inheritance tax will have on your estate, which may significantly impact the legacy you plan to leave the next generation.
All is not lost however, as there are some welcome changes to those saving for retirement, following the significant reform of the rules and allowances regarding pensions.
- The annual allowance for pension inputs has increased to £60,000, up from £40,000;
- The “adjusted income” limit for annual allowance tapering has increased to £260,000, up from £240,000;
- The minimum annual allowance (after tapering) that a… taxpayer has each tax year has increased to £10,000, up from £4,000; and
- The lifetime allowance charge has been removed on pension withdrawals exceeding the lifetime allowance.
With the everchanging environment to tax rates, thresholds and tax-free allowances, consideration to planning for tax liabilities has never been more pertinent. Please get in touch if you wish to explore this further, as we are more than happy to assist.