During last week’s mini-Budget, The Chancellor, Kwasi Kwarteng made extensive changes to taxation.
Notably, a one percentage point reduction to the basic rate of Income Tax will see it lowered to 19 per cent from April 2023 – a year earlier than previously announced by former Chancellor, Rishi Sunak.
Furthermore, the top rate, or Additional Rate of Income Tax, set at 45 per cent for those earning more than £150,000, will be withdrawn.
What does this mean for you?
If your yearly income is above £50,270, you will be taxed at 40 per cent. This is now the highest rate of Income Tax.
As well as rates of zero per cent, 19 per cent and 40 per cent, the changes signify one of the easiest rate structures within the OECD.
The cut will apply to the basic rate, relating to:
- The savings basic rate which applies to savings income for UK taxpayers
- The default basic rate which applies to non-savings and non-dividend income of any taxpayer that is not subject to either the main rates or the Scottish rates of Income Tax
- Non-savings, non-dividend income for taxpayers in England, Wales and Northern Ireland.
The Government added that, at 19 per cent, the basic Income Tax rate is the lowest yet, and will provide an average gain of £170 per year to 31 million taxpayers in 2023/24.
Good news for charities
For now, Income Tax will remain at 20 per cent for Gift Aid. However, this will decrease to 19 per cent in 2027.
This delay to the reduction of Gift Aid is set to benefit 70,000 charities, with a value of over £300 million.
For help with related taxation matters, contact our team today.