Money Wellness
Coins and bank notes on top of a HMRC tax bill
category iconmanaging your money
calendar icon20 Jan 2023

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.

Avatar of Rebecca Routledge

Rebecca Routledge

A qualified journalist for over 15 years with a background in financial services. Rebecca is Money Wellness’s consumer champion, helping you improve your financial wellbeing by providing information on everything from income maximisation to budgeting and saving tips.

Related posts

Disney+ prices set to soar from June

Thousands of subscribers face a massive hike in their Disney+ bills from this weekend

New law makes life easier for leasehold homeowners

The Leasehold and Freehold Reform Act was passed before parliament closed last week. Find out how it helps homeowners

Call for better money-management lessons in schools

A committee of MPs has called for better financial education in schools. Find out what needs to improve.

Debt and divorce

Find out everything you need to know about divorce and joint debt