The Chancellor, Kwasi Kwarteng, introduced sweeping tax reforms in last week’s mini-Budget.
In particular, the base rate of Income Tax will be reduced from 20% to 19% beginning in April 2023, a full year sooner than the date originally indicated by former Chancellor Rishi Sunak.
In addition, those with incomes above £150,000 will no longer be subject to the Additional Rate of Income Tax, which is currently at 45%.
To what extent does this affect you?
You will pay 40% of your income in taxes if it exceeds £50,270 per year. This is the current highest income tax rate.
The changes represent one of the simplest rate systems within the OECD, in addition to rates of 0%, 19%, and 40%.
The reduction will be reflected in the base rate and is associated with:
- The tax rate paid on interest and dividends from savings accounts in the UK
- Any taxpayer whose income is not covered by the main rates or the Scottish rates of Income Tax will have their non-savings and non-dividend income taxed at this default basic rate.
- Earnings in England, Wales, and Northern Ireland that do not come from dividends or savings.
In addition, the government said that in 2023–24, 31 million taxpayers would benefit from a net average increase of £170 due to the reduction in the basic Income Tax rate from 20% to 19%.
The good news for non-profits
Presently, the rate of Income Tax applied to Gift Aid will stay unchanged at 20%. In 2027, however, that figure will fall to 19%.
Over £300 million will be saved thanks to the postponement of the Gift Aid cut, which will help over 70,000 charities.
Reach out to our experts at AIT Accountants if you need for assistance with any tax concerns. Just email us at enquiries@aitaccountants.co.uk
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