How will the government's tax plans affect me?

How will the government's tax plans affect me?

The Chancellor Jeremy Hunt revealed government tax plans in his autumn statement 2022 that mean millions of people will pay more.

What is happening to income tax?

The level at which people start paying income tax has been frozen at £12,570 until April 2028. Anyone who earns more than this amount – known as the personal allowance - will pay income tax. The point at which people pay the higher tax rate has also been frozen until April 2028.

This means, as wages rise, people pay tax on more of their earnings and more people move into higher tax brackets.

It was also announced that, from April 2023, the level at which the country’s top earners start paying the highest rate of tax will fall from £150,000 to £125,140.

Income tax levels from April 2023

These are the rates for England, Wales and Northern Ireland. Scotland sets its own rates. We’ll look at Scotland’s rates separately.

Band	Previous level	New level	Rate
Personal allowance*	Up to £12,570	Frozen until 2028	0%
Basic rate	£12,571 - £50,270	Frozen until 2028	20%
Higher rate	£50,271 - £150,000	£50,271 - £125,140	40%
Additional rate	Over £150,000	Over £125,140	45%

* Reduced by £1 for every £2 made between £100,000 and £125,140

National insurance

Mr Hunt also confirmed that the levels at which you pay national insurance will stay the same until April 2028.

You don’t pay national insurance on the first £12,571 you earn a year. You then pay 12% on earnings up to £50,271 and 2% on any additional money made.

Tax in Scotland

The Scottish government set out its tax plans for 2023/24 on 15 December 2022.

From April 2023:

• The top rate threshold will be reduced from £150,00 to £125,140.
• The higher and top rates of tax will increase by 1% – meaning they will rise to 42% and 47% respectively.

Band	Previous level	Rate	New level	Rate
Personal allowance*	Up to £12,570	0%	Up to £12,570	0%
Starter rate	£12,571 - £14,732	19%	£12,571 - £14,732	19%
Basic rate	£14,733 - £25,688	20%	£14,733 - £25,688	20%
Intermediate rate	£25,689 - £43,662	21%	£25,689 - £43,662	21%
Higher rate	£43,663 - £150,000*	41%	£43,663 - £125,140*	42%
Top rate	Over £150,000	46%	Over £125,140	47%

*Personal allowance reduced by £1 for every £2 earned above £100,000

National insurance rates are the same in Scotland as the rest of the UK.