Know Your Tax Rates and Allowances for 2023-24
What is my personal tax allowance?
Your personal allowance is how much you can earn before paying income tax. For people who earn less than £100,000 per year, this is £12,570 for the 2023/24 tax year. If you earn between £100,000 and £125,140, the allowance decreases by £1 for every £2 you earn above £100,000, until it reaches £0. This means if you earn above £125,140, you won’t have a personal allowance. Anything you earn above your personal allowance will be subject to income tax.
What income tax band am I in?
How much income tax you pay depends on what band you fall into. For the 2023/24 tax year in England, Wales and Northern Ireland, these are:
• Personal Allowance: You do not pay any tax on earnings up to £12,570.
• Basic rate: You will pay 20% tax on anything you earn between £12,571 and £50,270.
• Higher rate: You will pay 40% tax on anything you earn between £50,271 and £125,140.
• Additional rate: You will pay 45% tax on anything you earn over £125,140.
For example, a basic rate taxpayer who earns £40,000 per year, will pay no tax on the first £12,570 they earn. The remaining £27,430 of their salary will be taxed at 20%.
What tax do I pay on savings income?
The personal savings allowance is how much interest you can earn on your savings without paying tax. Your allowance depends on your tax bracket:
• Basic rate taxpayers = £1,000 allowance
• Higher rate taxpayers = £500 allowance
• Additional rate taxpayers = £0 allowance
You may be able to earn up to £5,000 interest without paying tax. This is known as your starting rate for savings. If your other income (wages or pension) is £17,570 or more you’re not eligible for the starting rate for savings. If your other income is less than £17,570 your starting rate for savings is a maximum of £5,000. Every £1 of other income above your personal allowance reduces your starting rate for savings by £1.
What tax do I pay on dividend income?
Here you can see the tax rates on dividend income for the 2023/24 tax year. You’ll get a £1,000 tax-free dividend allowance, but for anything above that you’ll need to pay the following:
• Basic rate taxpayers = 8.75%
• Higher rate taxpayers = 33.75%
• Additional rate taxpayers = 39.35%
The rates applicable to trusts is as follows:
Trust income up to £1,000
• Dividend type income = 8.75%
• All other income = 20%
Trust income over £1,000
• Dividend type income = 39.35%
• All other income = 45%
If you have a Stocks and Shares ISA, your dividends are sheltered from UK tax so these rates won’t apply.
What is the ISA allowance for 2023/2024?
For ISAs, how much you can save or invest across the 2023/24 tax year is as follows:
| Type of ISA | 2023/24 |
| Total ISA limit excluding Junior ISAs (JISAs) | £20,000 |
| Lifetime ISA | £4,000 |
| Junior ISA | £9,000 |
For other tax incentivised investments, there are investment limits for which you can claim tax relief. For the 2023/24 tax year, these are:
| Type of investment | 2023/24 |
| Venture Capital Trust (VCT) at 30% | £200,000 |
| Enterprise Investment Scheme (EIS) at 30%* | £2,000,000 |
| EIS eligible for CGT deferral relief | No limit |
| Seed EIS (SEIS) at 50% | £200,000 |
| SEIS CGT reinvestment relief | 50% (capped at £100,000) |
*At least £1,000,000 must be invested in knowledge-intensive companies for the maximum tax relief to apply. Otherwise, the maximum amount you can claim relief on is £1,000,000.
How much tax relief can I get on pension contributions?
Depending on your tax band, you’ll get a certain percentage of tax relief on your pension contributions:
| Tax band | % of tax relief |
| Basic rate | 20% |
| Higher rate | 40%* |
| Top rate | 45%** |
*Higher rate taxpayers get an additional 20% of tax relief on any income they have paid 40% tax on.
**Top rate taxpayers get additional tax relief of 25% up to the amount of income they have paid 45% tax on.
Tax relief is limited to relief on contributions up to the higher of:
• 100% of your UK taxable earnings
• £3,600
There is a limit to how much you can contribute to all your pensions before facing a tax charge:
| Pension contribution limits | 2023/24 |
| Annual allowance* | £60,000 |
| Money purchase annual allowance | £10,000 |
*Reduced by £1 for every £2 of adjusted income over £260,000 to a minimum of £10,000, subject to threshold income being over £200,000.
What are the capital gains tax rates?
If you make more than £6,000 in gains on an asset that you sell or give away, you might have to pay capital gains tax. For example, on a property that’s not your main home or certain business assets.
| Tax rates | 2023/24 |
| Individuals: below UK higher rate income tax band | 10% |
| Individuals: within UK higher and additional rate income tax bands | 20% |
| Trusts and estates | 20% |
| Surcharge for residential property and carried interest | 18% and 28% tax for individuals for residential property and carried interest |
| Annual exempt amount (for individuals, estates, etc.) | £6,000 |
| Annual exempt amount (for trusts generally) | £3,000 |
There’s also the Business Asset Disposal Relief, which allows those eligible to pay tax at a reduced rate on the profit made from the sale of their company. You’ll need to have held the business or company in question for at least two years with a minimum 5% participation. If eligible, you’ll pay 10% tax on all gains on qualifying assets.
What are the current inheritance tax rates?
Inheritance tax may be paid on your estate when you die, reducing how much value will pass to your beneficiaries. It applies to estates worth more than £325,000, with everything over this threshold taxed at 40%. For the main rates for 2023/24, see the table below.
| Inheritance tax rates | 2023/24 |
| Nil-rate band* | £325,000 |
| Residence nil-rate band** | £175,000 |
| Rate of tax on excess | 40% |
| Rate if at least 10% of net estate left to charity | 36% |
| Lifetime transfers to and from certain trusts | 20% |
| Overseas domiciled spouse/civil partner exemption | £325,000 |
*Up to 100% of the unused proportion of a deceased spouse’s/civil partner’s nil-rate band and/or residence nil-rate band can be claimed on the survivor’s death
**Estates over £2,000,000: the value of the residence nil rate band is reduced by 50% of the excess over £2,000,000
Bear in mind that pension and tax rules can change and benefits depend on your circumstances.
What next?
There is valuable time left to make use of some valuable tax allowances. Some currently roll over, others don’t. If you can, it’s advisable to make use of every allowance you’re presented with whilst its available.
On April 6th, during the 2024/25 tax year, some personal allowances are changing. If you’d like to discuss what allowance you can utilise immediately or what opportunities the new limits offer in April, don’t hesitate to get in touch with one of our Financial Advisers.
You can book a free consultation with one of our Financial Advisers to learn more about your tax allowances and how we can help you.
Disclaimer
This article is for information only. Please do not act based on anything you might read in this article. Past performance is not a reliable indicator of current or future returns. This article contains general information only and does not consider individual objectives, taxation position or financial needs. Nor does this constitute a recommendation of the suitability of any investment strategy for a particular investor. It is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any trading strategy to any person in any jurisdiction in which such an offer or solicitation is not authorised or to any person to whom it would be unlawful to market such an offer or solicitation.
When you access a shared link of third-party websites, you are leaving our website and assume total responsibility and risk for your use of the third-party websites. We make no representation as to the completeness or accuracy of information provided at these websites nor do we endorse the content and information contained on those sites.